2021 first quarter earnings improved on higher commodity prices
A group of 46 US-based oil and gas producers and refiners posted a combined net income of $5.6 billion in first-quarter 2021, compared to net loss of $45.23 billion in the previous year’s first quarter. Total revenues were $185.01 billion for the quarter, compared to $197.07 billion a year ago.
During first-quarter 2021, higher prices for crude oil, natural gas, and natural gas liquids (NGL) all contributed to higher earnings of US E&P companies.
Crude oil prices rose significantly in first-quarter 2021, partly because Organization of Petroleum Exporting Countries (OPEC) and coordinating countries (OPEC+) decided to maintain the production reduction agreement implemented in first-half 2020. Global oil demand, still below pre-pandemic levels, has shown signs of recovery, thanks to the improvement of economic conditions and the availability of the COVID-19 vaccines. Disruptions to petroleum supply from extreme winter weather in the US, notably in Texas, also put upward pressure on crude oil prices during February.
Brent crude oil prices averaged $60.82/bbl in first-quarter 2021, compared with $50.44/bbl in first-quarter 2020 and $44.29/bbl in fourth-quarter 2020. West Texas Intermediate (WTI) averaged $57.8/bbl in first-quarter 2021, compared with $45.76/bbl in first-quarter 2020 and $42.45/bbl in fourth-quarter 2020.
However, with continued capital discipline by US E&P companies and high levels of market uncertainty, the recovery in oil prices did not trigger a strong rebound in US drilling activity and oil production. Moreover, oil production in the quarter was disrupted by the severe winter storm.
US crude oil production averaged 10.62 million b/d for first-quarter 2021, compared to 12.75 million b/d for the same quarter a year ago, according to Energy Information Administration (EIA) data.
According to Baker Hughes, the number of active oil rigs in the US rose from 267 at end-December 2020 to 330 at end-March 2021. This compared to 624 rigs at the end of March 2020.
US commercial crude oil stock at end March was 498 million bbl, compared to 482 million bbl at the end of in the previous year’s first quarter and a 5-year average of 481.2 million bbl.
US NGL production averaged 4.82 million b/d during the quarter, compared to 5.12 million b/d a year ago. Outgages at petrochemical plants in February led to record decline in ethane feedstock demand.
US independent refiners, however, continued to report losses for the quarter, reflecting higher crude costs, lower margins, higher turnaround costs, and disruptions due to the winter storm.
For first-quarter 2021, US refinery inputs were 14.15 million b/d, compared with 16.36 million b/d the same period a year ago. Refinery utilization rate was 78.1%, compared to 86.2% in the previous year’s first quarter.
According to Muse, Stancil & Co., refining cash margins in first-quarter 2021 averaged $11.30/bbl for Middle-West refiners, $8.38/bbl for West Coast refiners, $3.78/bbl for Gulf Coast refiners, and $2.88/bbl for East Coast refiners. In the same quarter of the prior year, these refining margins were $12.11/bbl, $10.96/bbl, $4.96/bbl, and $0.27/bbl, respectively.
Natural gas prices at Henry Hub averaged 3.56/MMbtu in first-quarter 2021, compared with 1.91/MMbtu for the same quarter a year ago.
During the cold snap that affected much of the central part of the country, US dry natural gas production fell to as low as 69.7 bcfd on Feb. 17, a decline of 21%, or down nearly 18.9 bcfd from the week ending Feb. 13. US dry gas production for the quarter decreased to 89.97 bcfd from 94.79 bcfd a year earlier.
A sample of 10 oil and gas producers and pipeline companies with headquarters in Canada posted collective net income of $3.55 billion (Canadian dollar) in first-quarter 2021, compared to net loss of $10.6 billion in the prior year’s quarter.
Western Canada Select (WCS) averaged $45.64/bbl for first-quarter 2021, and $25.60/bbl for first-quarter 2020, respectively. The WTI/WCS differential averaged $13/bbl for first-quarter 2021, compared to around $20/bbl in the same period of 2020.
US oil and gas producers
ExxonMobil Corp. recorded a net income of $2.73 billion for first-quarter 2021, compared to a net loss of $610 million in first-quarter 2020.
Total production volumes of the quarter increased by 98,000 oil-equivalent b/d from the fourth quarter. Excluding entitlement effects, government mandates and divestments, liquids volumes were down 3% including impacts from higher maintenance and the winter storm. Natural gas volumes increased 12% driven by higher seasonal demand in Europe.
During the quarter, production volumes in the Permian basin averaged 394,000 boe/d, an increase of 12% from the prior year. The focus remains on continuing to grow positive free cash flow by lowering overall development costs and increasing recovery through efficiency gains and technology applications.
Despite winter storm disruptions, ExxonMobil’s overall refining throughput was essentially flat with the fourth quarter as the company managed refinery operations in line with fuel demand and integrated chemical manufacturing needs.
Chevron Corp. announced a net profit of $1.38 billion for first-quarter 2021, down from net earnings of $3.6 billion in first-quarter 2020. Adjusted earnings of $1.7 billion in first-quarter 2021 compares to adjusted earnings of $2.5 billion in first-quarter 2020.
Chevron’s worldwide net oil-equivalent production was 3.12 million b/d in first-quarter 2021, a decrease of 4% from a year ago. US upstream operations earned $941 million the first quarter, compared with earnings of $241 million a year earlier, reflecting higher crude oil and natural gas realizations. International upstream operations earned $1.41 billion in first-quarter 2021, compared with $2.68 billion a year ago. The decrease in earnings was primarily due to lower sales volumes, the absence of a 2020 gain on the sale of Philippine assets, lower trading results, lower natural gas realizations, and lower tax items. These decreases were partly offset by higher crude oil realizations.
Chevron’s US downstream operations reported a loss of $130 million in first-quarter 2021, compared with earnings of $450 million a year earlier. The decrease was mainly due to lower margins on refined product sales and lower sales volumes. Refinery crude oil input in first-quarter 2021 decreased 9% to 881,000 b/d from the year-ago period. International downstream operations reported earnings of $135 million in first-quarter 2021, compared with earnings of $653 million a year earlier.
ConocoPhillips recorded first-quarter 2021 net earnings of $982 million, compared with a net loss of $1.74 billion a year earlier. Production excluding Libya for the first quarter of 2021 was 1.49 MMboe/d, an increase of 210,000 boe/d from the same period a year ago. After adjusting for closed acquisitions and dispositions, first-quarter 2021 production decreased 59,000 boe/d or 4% from the same period a year ago. This decrease was primarily due to normal field decline and production impacts from Winter Storm Uri, partially offset by new production from the Lower 48 and other development programs across the portfolio.
Devon Energy Corp. had first-quarter 2021 net earnings of $213 million, compared with a net loss of $1.82 billion a year ago. First-quarter oil production averaged 268,000 b/d, exceeding guidance by 5,000 b/d. This performance was driven by the company’s Delaware basin asset that accounted for 62% of total production. Devon estimates that production in the quarter was reduced by 8% due to severe winter weather.
EOG Resources reported net earnings of $677 million for first-quarter 2021 as compared to net earnings of $10 million for first-quarter 2020. Overcoming downtime from Winter Storm Uri, which reduced first quarter production by about 3%, total company crude oil production of 431,000 b/d was above the high end of the guidance range and just 3% lower than fourth-quarter 2020. NGL production was 12% lower, partially offset by a 4% increase in natural gas production, driven by the market-based decision to reduce ethane extraction. Total company equivalent volumes decreased 3%.
Occidental Petroleum Corp. had a net loss of $346 million for first-quarter 2021, compared with a net loss of $2.23 billion a year earlier. Total average global production of 1.12 MMboe/d for the quarter exceeded the midpoint of guidance by 17,000 boe/d. Rockies and Gulf of Mexico exceeded the high end of guidance with production of 296,000 boe/d and 151,000 boe/d, respectively. Permian production of 457,000 boe/d came in at the high end of guidance. International average daily production volumes were 213,000 boe/d.
US independent refiners
HollyFrontier Corp. recorded a net income of $148.2 million for first-quarter 2021, compared to a net loss of $304.6 million in first-quarter 2020. The first quarter results reflect special items that collectively increased net income by a total of $233.5 million. Excluding these items, net loss for the current quarter was $85.3 million compared to net income of $86.5 million for first-quarter 2020, which excludes certain items that collectively decreased net income by $391.1 million.
The refining segment reported adjusted EBITDA of a negative $65.8 million for first-quarter 2021 compared to $175.9 million for first-quarter 2020. This decrease was driven by the impacts of planned maintenance and Winter Storm Uri on operations and lower realized margins along with higher laid-in crude costs, which resulted in a consolidated refinery gross margin of $8/bbl, a 28% decrease compared to $11.06 for first-quarter 2020. Crude oil charge averaged 348,170 b/d for the current quarter compared to 392,630 b/d for first-quarter 2020.
Marathon Petroleum Corp. (MPC) reported earnings of $64 million for first-quarter 2021, compared with a net loss of $10.2 billion in first-quarter 2020. Adjusted net loss was $132 million for the quarter, compared with an adjusted net loss of $106 million for first-quarter 2020. First-quarter 2020 results include pre-tax charges of $12.4 billion related to non-cash impairments.
MPC’s refining and marketing (R&M) segment loss from operations was $598 million in first-quarter 2021, compared with a $497-million loss in first-quarter 2020. The decrease was primarily due to lower throughput and narrower crude differentials, partially offset by reduced operating costs.
R&M margin was $10.16/bbl for the first quarter, versus $11.86 for first-quarter 2020. Crude capacity utilization was 83%, resulting in total throughput of 2.6 million b/d. Clean product yield was 85%.
Phillips 66 recorded a net loss of $654 million in first-quarter 2021, compared with a net loss of $2.5 billion for the prior year’s quarter.
Refining had a first-quarter 2021 pre-tax loss of $1 billion, compared with a pre-tax loss of $1.1 billion in fourth-quarter 2020. First-quarter results included $14 million of maintenance and repair costs resulting from the winter storms. Fourth-quarter results included $22 million of hurricane-related costs and $3 million of pension settlement expense, partially offset by $6 million of favorable UK R&D credits.
Phillips 66’s first-quarter realized margins were $4.36/bbl, up from $2.18 in the prior quarter, due to an increase in market crack spreads and the sale of electricity to help meet demand in the Texas market, partially offset by lower product differentials and higher RIN costs. Pre-tax turnaround costs for the first quarter were $192 million, compared with fourth-quarter costs of $76 million. Crude utilization rate was 74% in the first quarter, up from 69% in the fourth quarter. Clean product yield was 82% in the first quarter.
Valero Energy Corp. recorded a net loss of $704 million for first-quarter 2021, compared to a net loss of $1.85 billion in first-quarter 2020.
The refining segment reported a $592 million operating loss for first-quarter 2021, compared to an operating loss of $2.1 billion for first-quarter 2020. First quarter adjusted operating loss was $554 million, compared to adjusted operating income of $329 million in first-quarter 2020, which excludes the LCM inventory valuation adjustment.
The operating loss for first-quarter 2021 includes estimated excess energy costs of $525 million related to impacts from Winter Storm Uri. Refinery throughput volumes averaged 2.4 million b/d in first-quarter 2021, which was 414,000 b/d lower than first-quarter 2020. Refining margin decreased to $6.68/bbl from $7.24/bbl a year ago.
The renewable diesel segment, which consists of the Diamond Green Diesel (DGD) joint venture, reported $203 million of operating income for first-quarter 2021, compared to $198 million for first-quarter 2020.
Canadian firms
All financial figures are presented in Canadian dollars unless noted otherwise.
Suncor Energy recorded a net profit of $821 million for first-quarter 2021, compared to a net loss of $3.53 billion in first-quarter 2020. Building on strong upstream exit rates in 2020, the company increased quarterly production in first-quarter 2021. Suncor’s total upstream production increased to 785,900 boe/d in quarter, compared to 739,800 boe/d in the prior year quarter, and included the second-best quarter of synthetic crude oil (SCO) production in the company’s history.
Canadian Natural Resources recorded net earnings of $1.38 billion for first-quarter 2021, up from a net loss of $1.28 billion a year ago. Excluding special items, adjusted net earnings from operations for first-quarter 2021 were $1.22 billion compared with an adjusted net loss from operations of $295 million for first-quarter 2020.
Total production of crude oil and NGLs before royalties for first-quarter 2021 increased 4% to 979,352 b/d from 938,676 b/d for first-quarter 2020 and increased 6% from 927,190 b/d for fourth-quarter 2020. Total production before royalties for the first quarter increased 6% to 1.24 MMboe/d from 1.18 MMboe/d for first-quarter 2020 and increased 4% from 1.2 MMboe/d for fourth-quarter 2020.
Cenovus Energy Inc. posted a net income of $220 million for first-quarter 2021, up from a net loss of $1.8 billion in first-quarter 2020. Upstream production averaged 769,254 boe/d in the first quarter, compared with 482,594 boe/d in first-quarter 2020. Foster Creek and Christina Lake production was comparable to first-quarter 2020, and significant production was added from assets acquired in the merger with Husky Energy Inc.
Cenovus’ downstream crude throughput averaged 469,100 b/d in the first quarter compared with 221,100 b/d in first-quarter 2020. Assets acquired in the transaction with Husky Energy averaged 299,000 b/d in first-quarter 2021. Its US refineries ran below capacity primarily due to economic run cuts due to low market crack spreads early in the quarter and planned turnarounds at Wood River and Borger refineries. US operations were also impacted by an outage at the Lima refinery in early February and Winter Storm Uri.
Imperial Oil Ltd. announced a net profit of $392 million for first-quarter 2021, compared to a net loss of $188 million in first-quarter 2020. Upstream production for the first quarter averaged 432,000 boe/d, the highest first quarter production in 30 years. Kearl total gross production averaged 251,000 b/d, establishing a new production record for each month of the first quarter.
Downstream throughput averaged 364,000 b/d in the first quarter, with utilization at 85%, up from 359,000 b/d in fourth-quarter 2020. Petroleum product sales were 414,000 b/d, compared to 416,000 b/d in fourth-quarter 2020. Despite continuing weak demand, downstream generated net income of $292 million in the first quarter, an increase of $186 million from fourth-quarter 2020, primarily driven by stronger product margins.
Conglin Xu | Managing Editor-Economics
Conglin Xu, Managing Editor-Economics, covers worldwide oil and gas market developments and macroeconomic factors, conducts analytical economic and financial research, generates estimates and forecasts, and compiles production and reserves statistics for Oil & Gas Journal. She joined OGJ in 2012 as Senior Economics Editor.
Xu holds a PhD in International Economics from the University of California at Santa Cruz. She was a Short-term Consultant at the World Bank and Summer Intern at the International Monetary Fund.
Laura Bell-Hammer | Statistics Editor
Laura Bell-Hammer has been the Statistics Editor for the Oil & Gas Journal since 1994. She was the Survey Editor for two years prior to her current position with OGJ. While working with OGJ, she also was a contributing editor for Oil & Gas Financial Journal. Before joining OGJ, she worked for Vintage Petroleum in Tulsa, gaining her oil and gas industry knowledge.