A sample of 57 US-based oil and gas firms posted a combined net income of $15.2 billion in this year’s second quarter compared with earnings of $13.56 billion in the previous year’s second quarter. Revenues totaled $251.1 billion compared with $251.4 billion a year ago.
The increase in earnings was mainly due to higher production volumes, which was partially offset by lower crude oil and natural gas realizations.
For the second quarter, US crude oil production averaged 12 million b/d compared with 10.54 million b/d for second-quarter 2018, according to the US Energy Information Administration. US natural gas liquids production averaged 4.8 million b/d during the quarter compared with 4.3 million b/d a year ago.
Brent crude oil prices began this year at $53/bbl and steadily increased throughout the first quarter due to a tightening supply with a new round of production cuts by the Organization of Petroleum Exporting Countries and its allies (OPEC+) and US sanctions on Venezuela and Iran. Prices fell from their highs in June amid growing concern about future oil demand growth due to trade-war tensions and policy uncertainties as well as rising US crude production and inventories.
Brent prices averaged $68.92/bbl in this year’s second quarter compared with $74.50/bbl in second-quarter 2018. West Texas Intermediate averaged $59.78/bbl in this year’s second quarter compared with $68.03/bbl in second-quarter 2018. WTI’s discount to Brent continued increasing due to growing US production and pipeline bottlenecks getting the inland crude to the coast.
Due to lower commodity prices, drilling activity softened. According to Baker Hughes, the number of oil rigs in the US dropped from 816 at the end of March to 788 at the end of June. Many E&P companies reduced their capital spending plans for 2019.
US marketed gas production climbed to 2.95 tcf in this year’s second quarter compared with 2.65 tcf for the prior year’s second quarter.
Natural gas prices at Henry Hub averaged $2.56/MMbtu for the second quarter compared with $2.86/MMbtu for second-quarter 2018.
Refinery throughput and capacity utilization were below year-ago levels. Dwindling heavy oil supplies, unplanned outages, and heavy maintenance contributed to reduced US refinery activity.
During this year’s second quarter, US refinery inputs were 17.13 million b/d compared with 17.5 million b/d in the same period a year ago. The refinery utilization rate was 91% in this year’s second quarter compared with 94% in second-quarter 2018.
According to Muse, Stancil & Co., refining cash margins in this year’s second quarter averaged $16.03/bbl for the Midwest, $20.17/bbl for the West Coast, $6.54/bbl for the Gulf Coast, and $2.44/bbl for the East Coast. In the same quarter of the prior year, these refining margins were $16.91/bbl, $21.09/bbl, $10.52/bbl, and $3.03/bbl, respectively.
A sample of 12 oil and gas producers and pipeline companies with headquarters in Canada posted combined net earnings of $12.03 billion (Can.) for the second quarter compared with net earnings of $3.65 billion in the prior year’s quarter.
Western Canada Select (WCS) averaged $49.31/bbl in this year’s second quarter and $48.81/bbl for the same quarter in 2018, in part because of mandatory production curtailment. The WTI/WCS differential narrowed during this year’s second quarter to average $11/bbl compared with $19/bbl in the same quarter of 2018.
The Canadian dollar against the US dollar fetched 75¢ in this year’s second quarter, a decrease of 3¢ from second-quarter 2018.
Also, on June 28, the Alberta government enacted a 4% decrease in the provincial tax rate, from 12% to 8% by 2022, generating favorable impacts on Canadian firms’ earnings.
US oil and gas producers
ExxonMobil Corp. posted a net profit of $3.13 billion for this year’s second quarter compared with net income of $3.95 billion for second-quarter 2018.
ExxonMobil’s worldwide oil-equivalent production during the second quarter was 3.9 million b/d, up 7% from second-quarter 2018. Liquids production increased 8%, driven by Permian basin growth and reduced downtime. Natural gas volumes increased 5%, excluding entitlement effects and divestments. However, growth in volumes was largely offset by lower liquids prices and higher exploration expenses.
The company’s capital and exploration expenditures were $8.1 billion, up 22% from the prior year, reflecting key investments in the Permian basin.
Chevron Corp. posted second-quarter net profit of $4.3 billion compared with net income of $3.4 billion for the prior year’s second quarter.
Worldwide net oil-equivalent production was 3.08 million b/d in the second quarter, an increase of 9% from 2.83 million b/d from a year ago. Second-quarter unconventional production in the Permian basin was 421,000 b/d, representing growth of more than 50% compared with a year ago.
US upstream operations earned $896 million in this year’s second quarter compared with $838 million a year earlier. The increase was primarily due to higher crude oil production, partially offset by lower crude oil and natural gas realizations, higher operating and depreciation expenses primarily related to increased Permian activity, and higher tax items.
US downstream operations earned $465 million in the second quarter compared with earnings of $657 million a year earlier. The decrease was primarily due to lower margins on refined product sales and lower equity earnings from Chevron Phillips Chemical Co. LLC. International downstream operations earned $264 million in the quarter compared with $181 million a year earlier.
Refinery crude oil input of 599,000 b/d in the quarter decreased 140,000 b/d from the year-ago period, mainly due to the sale of the company’s interest in the Cape Town refinery in third-quarter 2018 and maintenance at the GS Caltex refinery in Yeosu, South Korea, in this year’s second quarter.
ConocoPhillips reported second-quarter net profit of $1.58 billion compared with net profit of $1.64 billion a year ago. Earnings were lower compared with second-quarter 2018 primarily because of lower realized prices and a lower unrealized gain on their Cenovus Energy equity, partially offset by higher volumes and a financial tax benefit related to the planned UK disposition.
Production, excluding Libya, for this year’s second quarter was 1.29 million boe/d, an increase of 79,000 boe/d compared with the same period a year ago, primarily because of growth from the Big 3 unconventionals, development programs, and major projects in Alaska, Europe, and the Asia Pacific. This growth more than offset normal field decline and downtime from planned turnarounds.
Devon Energy Corp. announced a net income of $495 million for this year’s second quarter, up from a net loss of $425 million in second-quarter 2018. US light-oil production averaged 142,000 b/d, a 13% increase compared with second-quarter 2018. The strongest asset-level performance was achieved by the company’s Delaware basin operations in southeast New Mexico. Production from this play increased 58% year-over-year, driving volumes in the Delaware to 120,000 boe/d.
Diamondback Energy Inc. posted second-quarter net earnings of $349 million compared with a net income of $219 million a year ago. Second-quarter production of 280,000 boe/d (68% oil) was up 7% over this year’s first quarter and 149% over second-quarter 2018. The company updated its capex guidance for this year to $2.725-2.95 billion, narrowed from $2.7-3 billion previously. However, Diamondback expects to complete 300-320 operated horizontal wells, up from 290-320 wells previously.
Pioneer Natural Resources Co. recorded a net loss of $169 million for this year’s second quarter compared with net earnings of $66 million for second-quarter 2018. The company also reduced the top-end of its capital spending program for this year by $150 million, or 4.5%.
Southwestern Energy Co. posted net earnings of $138 million for this year’s second quarter compared with net earnings of $51 million for second-quarter 2018. Total production was up 11% compared with the prior year’s second quarter, excluding Fayetteville. Exploration and production capital invested was $349 million for the quarter, 8% lower than second-quarter 2018.
US refiners
Marathon Petroleum Corp. recorded a net profit of $1.1 billion for this year’s second quarter compared with a net income of $1.05 billion for second-quarter 2018. Refining and marketing segment income from operations was $906 million in the second quarter compared with $1 billion in the same quarter of 2018. The year-over-year decrease was primarily driven by narrower crude differentials and lower product realizations. The company’s refining and marketing margin was $15.24/bbl for the quarter.
Refinery capacity utilization was 97%, resulting in total throughputs of 3.1 million b/d for the second quarter, which was 1.1 million b/d higher than the throughput for second-quarter 2018. The increase was primarily because of the addition of the Andeavor’s refineries.
Phillips 66 recorded a second-quarter net profit of $1.4 billion compared with a net income of $1.34 million in the same year-ago quarter.
Refining adjusted pretax income was $983 million in this year’s second quarter compared with an adjusted pretax loss of $219 million in this year’s first quarter. The improvement was largely due to higher realized margins and volumes. Realized margins for the quarter increased to $11.37/bbl from $7.23/bbl in the first quarter, primarily driven by higher gasoline crack spreads. The company’s worldwide crude utilization rate was 97%, up from 84% in the first quarter.
Valero Energy Corp. reported a net profit of $612 million for this year’s second quarter, down from a net income of $845 million in second-quarter 2018.
The refining segment reported $1 billion of operating income for this year’s second quarter compared with $1.4 billion for second-quarter 2018. The decrease was primarily driven by narrower discounts for medium and heavy sour crude oils relative to Brent crude. Refinery throughput capacity utilization was 94%, with throughput volumes averaging 3 million b/d in this year’s second quarter, which was 70,000 b/d higher than in second-quarter 2018. The company exported a total of 344,000 b/d of gasoline and distillate during this year’s second quarter.
Canadian firms
All financial figures presented below are expressed in Canadian dollars unless noted otherwise.
Suncor Energy Inc. reported second-quarter net earnings of $2.73 billion compared with net earnings of $972 million a year earlier. This year’s second-quarter earnings included a one-time deferred income tax recovery of $1.12 billion to reflect the staged reduction of Alberta’s corporate income tax rate from 12% to 8% over the next 4 years.
Suncor’s operating earnings were $1.25 billion compared to operating earnings of $1.19 billion in the prior year’s second quarter, an increase of 10%. Total oil sands production during this year’s second quarter increased to 692,200 b/d, up from 547,600 b/d in the prior year’s second quarter. Despite being limited by production curtailments, oil sands achieved a new second-quarter production record, with the increase because of improved oil sands utilization and an increase in Fort Hills production. Fort Hills production was 89,300 b/d compared with 70,900 b/d in the prior year’s second quarter.
Exploration and production had 111,700 b/d of production in the second quarter, including improved Hebron production of 23,600 b/d following the completion of the sixth production well during the quarter.
Suncor’s refining and marketing division delivered strong financial results, despite the impact of planned maintenance during the quarter, because of improved refining margins and higher crude throughput. Quarterly funds from operations were $932 million and operating earnings were $677 million compared with $892 million and $671 million, respectively, in the prior year’s quarter.
Canadian Natural Resources Ltd. reported net earnings of $2.8 billion for this year’s second quarter compared with a net income of $982 million for second-quarter 2018.
Heavy crude oil production decreased 8% from the second-quarter 2018 levels primarily because of the widening price differentials in 2018 and the impact of the government of Alberta mandating production curtailments that came into effect Jan. 1. Meantime, its light crude oil and NGL production in North America averaged 102,368 b/d in this year’s second quarter, a 14% increase over second-quarter 2018 and a 7% increase over this year’s first quarter levels.
Imperial Oil’s net income for this year’s second quarter was $1.21 billion, up from net income of $196 million in the same period of 2018. Second-quarter results include a favorable impact of $662 million associated with the Alberta corporate income tax rate decrease.
Excluding this impact, second-quarter adjusted net income was $296 million, an increase of $302 million from second-quarter 2018. Improved results reflect higher volumes, primarily at Syncrude, Kearl, and Norman Wells, as well as the impact of higher Canadian crude oil realizations.
Cenovus Energy Inc. reported net earnings of $1.78 billion for this year’s second quarter, up from a net loss of $418 million in second-quarter 2018. The company reduced net debt to $7.1 billion in the second quarter after generating more than $830 million in free funds flow.
EnCana Corp. reported second quarter net profit of $439.9 million compared with a net loss of $197.7 million in second-quarter 2018. Total production in the quarter was 591,800 boe/d, up 11% year-over-year on a proforma basis. Liquids production increased 16% year-over-year to 324,000 b/d.