Firms report fourth quarter loss on lower prices, impairments

A group of 52 US-based oil and gas producers and refiners reported a collective net loss of $12.24 billion in the fourth quarter of 2019, compared to combined earnings of $21.48 billion in the fourth quarter of 2018. For the full-year 2019, the group of firms reported net earnings of $25.4 billion, down from $73 billion in 2018.

During the fourth quarter of 2019, Brent crude oil prices averaged $63.41/bbl, compared with $67.71/bbl in the fourth quarter of 2018, and $61.93/bbl in the third quarter of 2019. West Texas Intermediate (WTI) averaged $56.96/bbl in the fourth quarter of 2019, compared with $59.08/bbl in the fourth quarter of 2018 and $56.37/bbl in the third quarter of 2019. For the full-year 2019, Brent averaged $64.35/bbl, and WTI averaged $56.98/bbl, down from $71.34/bbl and $65.23/bbl in 2018, respectively.

Drilling activities slowed on lower oil prices. The number of active oil rigs in the US declined to 677 at the end of December 2019 from 713 at the end of June 2019, according to Baker Hughes. This also compared to 885 rigs at the end of 2018.

Despite the decline in drilling rigs, US crude oil production increased to 12.77 million b/d in the fourth quarter of 2019 from 11.89 million b/d in the fourth quarter of 2018 on increases in rig efficiency and well-level productivity. US natural gas liquids production averaged about 5 million b/d during the quarter, compared to 4.55 million b/d a year ago.

Refining activities were lower during the quarter as compared to the year-ago levels, with heavy maintenance. US refinery inputs were 16.87 million b/d in the fourth quarter of 2019, compared with 17.33 million b/d in the fourth quarter of 2018. Refinery utilization rate was 89.7% for the quarter, down from 93.4% in the fourth quarter of 2018.

According to Muse, Stancil & Co., refining cash margins in the fourth quarter of 2019 averaged $16.79/bbl for Middle-West refiners, $17.29/bbl for West Coast refiners, $6.97/bbl for Gulf Coast refiners, and $2.25/bbl for East Coast refiners. In the same quarter of the prior year, these refining margins were $10.97/bbl, $29.62/bbl, $2.82/bbl, and $1.28/bbl, respectively.

For the full-year 2019, refining cash margins averaged $16.84/bbl for Middle-West refiners, $14.34/bbl for West Coast refiners, $5.95/bbl for Gulf Coast refiners, and $2.55/bbl for East Coast refiners. For 2018, these refining margins were $24.89/bbl, $14.38/bbl, $7.76/bbl, and $2.78/bbl, respectively.

Natural gas prices at Henry Hub averaged 2.4/MMbtu in the fourth quarter of 2019, compared with 3.8/MMbtu in the fourth quarter of 2018. US marketed gas production increased to 103.26 tcf from 94.76 tcf a year ago.

A sample of 10 oil and gas producers and pipeline companies with headquarters in Canada reported a collective net loss of $2.01 billion (Can.) in the fourth quarter of 2019, compared to net earnings of $577 million in the prior year’s quarter.

The group of Canadian firms reported net earnings of $20.6 billion for full-year 2019, compared to earnings of $13 billion in 2018. The 2019 results include a favorable impact associated with the Alberta corporate income tax rate decrease enacted in June. Also, the full-year upstream results benefited from a 52% narrowing of the differential between WTI and Western Canadian Select (WCS) crude oil prices in 2019 compared with 2018.

US oil and gas producers

ExxonMobil Corp. reported 2019 fourth quarter net profit of $5.69 billion, compared with net earnings of $6 billion for the prior year’s fourth quarter. Oil-equivalent production was in line with the fourth quarter of 2018, at 4 million b/d, with a 4% increase in liquids offset by a 5% decrease in gas. Permian production was up 54% year-over-year. The company also achieved first oil in Guyana, ahead of schedule, and resource estimate increases to over 8 billion bbl.

During the 2019 fourth quarter, ExxonMobil completed the previously announced sale of its non-operated upstream assets in Norway for $4.5 billion as part of its plans to divest some $15 billion in non-strategic assets by 2021. The corporation’s 2019 fourth quarter earnings include a $3.7 billion gain on the sale.

On the downstream side, lower margins and the absence of prior year identified items contributed to significantly decreased earnings.

Chevron Corp. reported a net loss of $6.61 billion for fourth-quarter 2019 as compared to a net income of $3.73 billion for fourth-quarter 2018. Included in the current quarter were previously announced upstream impairments and write-offs totaling $10.4 billion associated with Appalachia shale, Kitimat LNG, Big Foot, and other projects. The company also recognized a $1.2 billion gain on the sale of the UK Central North Sea assets in the fourth quarter. Foreign currency effects decreased earnings by $256 million. The company’s worldwide net oil-equivalent production was 3.08 million b/d in fourth-quarter 2019, unchanged from a year ago.

ConocoPhillips posted a net profit of $720 million for fourth-quarter 2019, down from net earnings of $1.87 billion in fourth-quarter 2018. Production excluding Libya for the fourth quarter of 2019 was 1.3 MMboe/d. Adjusting for closed dispositions and acquisitions, underlying production increased 24,000 boe/d primarily due to production growth from the Big 3, development programs, and major projects in Alaska, Europe, and Asia Pacific. This growth more than offset normal field decline. Production from Libya averaged 45,000 boe/d.

Devon Energy Corp. posted a net loss of $642 million in fourth-quarter 2019, compared with a net income of $1.15 billion a year earlier. The quarterly loss was attributable to a $748 million non-cash impairment charge related to the divestiture of Barnett shale assets.

Total net production from Devon’s retained assets averaged 340,000 boe/d during the fourth quarter. Oil production averaged 160,000 b/d, a 28% increase from the same period a year ago.

EOG Resources Inc.’s net profit of $636.5 million for fourth-quarter 2019 was down from a net profit of $892.8 million in fourth-quarter 2018.

For full-year 2019, EOG reported net income of $2.7 billion, compared with net income of $3.4 billion for full-year 2018.

EOG’s total crude oil volumes in the fourth quarter of 2019 were 468,900 b/d, which represents an 8% increase compared with the same prior year period. NGL and natural gas volumes increased by 17% and 15%, respectively, during this same period.

Hess Corp. announced a net loss of $222 million for fourth-quarter 2019, compared to a net loss of $4 million in fourth-quarter 2018. Oil and gas net production averaged 316,000 boe/d, excluding Libya, up from 267,000 boe/d in the fourth quarter of 2018. Bakken net production was 174,000 boe/d, up 38% from the prior-year quarter. Exploration and production (E&P) capital and exploratory expenditures were $876 million, compared with $618 million in the prior-year quarter.

Occidental Petroleum reported a net loss of $1.34 billion for the fourth quarter of 2019 as compared to net earnings of $706 million for fourth-quarter 2018. Fourth quarter pre-tax items affecting comparability included a charge of about $1 billion to reflect Occidental’s investment in Western Midstream Partners LP (WES) at fair value as of Dec. 31, 2019, Anadarko acquisition-related transaction costs of $656 million, and net gains of $475 million on assets sales.

Chesapeake Energy Corp. posted a net loss of $346 million for the fourth quarter of 2019 as compared to net earnings of $576 million for fourth-quarter 2018. The fourth-quarter 2019 adjusted net loss was $80 million, compared to adjusted net income of $32 million in the prior year quarter.

Average production for the fourth quarter 2019 was about 477,000 boe/d, compared to 464,000 boe/d for fourth-quarter 2018. Overall, fourth quarter oil production grew 45% from fourth-quarter 2018, and represented about 26% of the company’s total production, the highest oil mix in Chesapeake’s history, compared to 19% in the fourth quarter of 2018.

US refiners

HollyFrontier Corp. recorded a net income of $60.6 million for fourth-quarter 2019 as compared to net earnings of $141.9 million for fourth-quarter 2018.

The refining segment reported adjusted EBITDA of $171.6 million compared to $583.4 million for the fourth quarter of 2018. This decrease was primarily due to heavy planned refinery maintenance, lower product margins, and depressed crude differentials. The consolidated refinery gross margin of $13.58/bbl decreased 39% compared to $22.17/bbl for the fourth quarter of 2018. Crude oil charge averaged 380,560 b/d for the quarter, down from 405,580 b/d for the fourth quarter 2018.

Marathon Petroleum Corp. announced net earnings of $443 million for fourth quarter 2019, down from net income of $951 million for 2018 fourth quarter. Adjusted net income was $1 billion for the fourth quarter of 2019, compared to $1.7 billion for the fourth quarter of 2018. Fourth-quarter 2019 results include a pre-tax charge of $1.2 billion primarily related to a midstream goodwill impairment related to MPLX LP.

Refining and marketing segment’s adjusted EBITDA were $1.5 billion in the fourth quarter of 2019, versus $2.3 billion for the fourth quarter of 2018, excluding refinery planned turnaround costs. The quarter-over-quarter decrease in R&M earnings was primarily due to narrower sweet and sour crude differentials partially offset by higher blended crack spreads. Crude capacity utilization was 94%, resulting in total throughputs of 3.1 million b/d for the fourth quarter of 2019. Both were in line with the year-ago levels.

Phillips 66’s refining adjusted pre-tax income was $345 million in the fourth quarter of 2019, compared with $839 million in the third quarter of 2019. The decrease is primarily driven by turnarounds and lower realized margins. The decrease in realized margins was due to a decline in 3:2:1 market crack spreads and lower secondary product margins, partially offset by widening Gulf Coast and Central Corridor crude differentials.

The chemicals segment reflects Phillips 66’s equity investment in Chevron Phillips Chemical Co. LLC. Chemicals’ fourth-quarter pre-tax income was $150 million, compared with $227 million in the third quarter. Chemicals results in both periods included reductions to equity earnings from lower-of-cost-or-market inventory adjustments.

Valero Energy Corp. reported a fourth-quarter 2019 net income of $1.06 billion, compared with a net income of $952 million a year ago. The refining segment reported $1.4 billion of operating income for the fourth quarter of 2019 compared to $1.5 billion for the fourth quarter of 2018. Refinery throughput volumes averaged 3 million b/d in the fourth quarter of 2019, which is in line with the fourth quarter of 2018.

Canadian firms

All financial figures are presented in Canadian dollars unless noted otherwise.

Canadian Natural Resources announced net earnings of $597 million for fourth-quarter 2019, compared to a net loss of $776 million in fourth-quarter 2018. The company achieved quarterly production volumes of 1.15 million b/d in fourth-quarter 2019, a 7% increase and 2% decrease from fourth-quarter 2018 and third-quarter 2019 levels, respectively. The increase over the year-ago level primarily reflected production from the acquisition of thermal in situ and primary heavy crude oil assets from Devon Canada. The decrease from third-quarter 2019 primarily reflected the proactive piping replacement at Horizon in fourth-quarter 2019.

Cenovus Energy Inc. recorded a net income of $113 million for fourth-quarter 2019, compared to a net loss of $1.35 billion in fourth-quarter 2018 when the company recorded a $2.1 billion exploration expense write off. The company achieved fourth quarter oil sands production of more than 374,000 b/d, up from 355,000 b/d in the third quarter of 2019 mainly due to reduced curtailment levels.

Imperial Oil Ltd. recorded fourth-quarter 2019 net income of $271 million, compared with net earnings of $853 million a year earlier. Net income for the full-year 2019 was $2.2 billion, down from $2.3 billion for 2018.

The company’s net production volumes during the quarter averaged 362,000 boe/d compared with 383,000 boe/d in the year-ago quarter. Total oil and NGL output amounted to 335,000 b/d compared with 360,000 b/d in fourth-quarter 2018. The downside was primarily caused by planned turnaround activity. Net natural gas production came in at 163 MMcfd, higher than 138 MMcfd in the comparable quarter last year.

Imperial’s downstream net income of $225 million fell from $1.14 billion due to lower margins and planned turnaround activities. Refinery throughput averaged 321,000 b/d, compared to 408,000 b/d in the fourth quarter of 2018. Capacity utilization was 76%, compared to 96% in the fourth quarter of 2018.

Suncor Energy Inc. posted a net loss of $2.34 billion for fourth-quarter 2019, compared to a net loss of $280 million in fourth-quarter 2018. In addition to the factors impacting operating earnings, the net loss for the fourth quarter of 2019 included $3.35 billion of non‑cash after-tax asset impairment charges.

Suncor’s total upstream production was 778,200 boe/d during the fourth quarter of 2019, compared to 831,000 boe/d in the prior year quarter. The decrease was primarily due to lower oil sands production as a result of planned maintenance and mandatory production curtailments in Alberta. Oil sands production was 418,100 b/d in fourth-quarter 2019, compared to 432,700 b/d in the prior year quarter. E&P production volumes increased from the prior year quarter, primarily due to higher production from East Coast Canada and Oda.

Suncor’s refinery crude throughput was 447,500 b/d and refinery utilization was 97% in fourth-quarter 2019, compared to crude throughput of 467,900 b/d and refinery utilization of 101% in the prior year quarter.

Husky Energy reported a net loss of $2.34 billion for fourth-quarter 2019, down from a net income of $216 million in fourth-quarter 2018. Total non-cash asset impairments and other charges were $2.3 billion (after tax) in 2019’s fourth quarter, primarily related to the its upstream assets in North America, including the Sunrise Energy project and the Atlantic and Western Canada segments, and were largely due to lower long-term commodity price assumptions and a reduction in future capital spending.

Husky Energy’s overall upstream production was 311,300 boe/d for the quarter compared to 304,300 boe/d in fourth-quarter 2018. Downstream throughput of 203,400 b/d, compared to 286,900 b/d in fourth-quarter 2018, reflecting the extended shutdown of the Lima refinery.