Fourth-quarter 2021 earnings continue to rise on favorable commodity prices
Supported by strong commodity prices and increased sales volumes, a sample of 34 US-based oil and gas producers and refiners reported a combined profit of $40.9 billion in fourth-quarter 2021, compared to a collective loss of $26.58 billion for the same quarter a year ago. Total revenues were $314.19 billion for the quarter, compared to $253.4 billion a year ago.
The group also reported full-year 2021 earnings of $85.54 billion, compared with a loss of $109.4 billion for full-year 2020.
The continued recovery in global oil demand, unplanned supply outages and strong inventory depletion in the fourth quarter pushed benchmark oil prices to 7-year highs. Despite calls for more oil, the OPEC+ group adhered to the previously agreed production cut.
Meantime, despite the surge in global COVID-19 cases due to Omicron in late 2021, the measures taken by governments to contain the virus were less severe than during previous waves, and their impact on economic activity and oil demand proved to be subdued.
Brent crude oil prices surged to $79.59/bbl in fourth-quarter 2021, compared to $44.29/bbl in fourth-quarter 2020, and $73.47/bbl in third-quarter 2021. US West Texas Intermediate (WTI) averaged $77.4/bbl in the fourth quarter, compared to $42.45/bbl in fourth-quarter 2020, and $70.62/bbl in third-quarter 2021.
For fourth-quarter 2021, US crude oil production averaged 11.69 million b/d, compared to 11.13 million b/d in third-quarter 2021, and 10.87 million b/d in the previous year’s fourth quarter, according to data from the US Energy Information Administration (EIA). US NGL production averaged 5.7 million b/d during the quarter, compared to 5.52 million b/d in 2021 third quarter, and 5.22 million b/d in fourth-quarter 2020.
Drilling activity continued to increase, driven by higher oil prices. According to Baker Hughes, the number of active oil rigs in the US grew to 480 at end December from 421 at end September. This also compared to 267 rigs at end December 2020.
US commercial crude oil stock at end December was 417 million bbl, compared to 485 million bbl at the end of the previous year’s fourth quarter and a 5-year average of 452.8 million bbl.
Refining margins strengthened on higher product demand. Refining cash margins in 2021 fourth quarter averaged $17.07/bbl for Middle-West refiners, $14.87/bbl for West Coast refiners, $11.57/bbl for Gulf Coast refiners, and $8.6/bbl for East Coast refiners, according to Muse, Stancil & Co. In the same quarter of the prior year, these refining margins were $7.38/bbl, $7.45/bbl, $1.22/bbl, and $1.42/bbl, respectively.
For fourth-quarter 2021, with higher product demand and improved refining margin environment, US refinery inputs were 16 million b/d, compared with 14.32 million b/d in the same period a year ago. Refinery utilization rate was 88.3%, compared to 77.9% in the previous year’s fourth quarter.
Natural gas spot prices at Henry Hub averaged $4.77/MMbtu in fourth-quarter 2021, compared with $2.53/MMbtu in fourth-quarter 2020, and $4.36/MMbtu in third-quarter 2021. The increase in natural gas prices reflected higher US LNG exports.
US marketed gas production grew to 105 bcfd from 98.54 bcfd for the same quarter a year ago. The number of active gas rigs increased to 106 at end December from 99 at end September.
A sample of 12 companies based in Canada, including oil and gas producers and pipeline operators, reported total earnings of $9.19 billion (Can.) in fourth-quarter 2021. For fourth-quarter 2020, the group’s combined earnings was $2.78 billion (Can.).
The Western Canada Select (WCS) averaged $62.55/bbl in fourth-quarter 2021, compared to $33.36/bbl in fourth-quarter 2020. However, the WTI-WCS differentials became wider during fourth-quarter 2021. The differentials averaged $14.65/bbl for fourth-quarter 2021, compared to $9.30/bbl for fourth-quarter 2020, and $13.58/bbl for third-quarter 2021. The widening of the differentials reflected the increase in WTI benchmark pricing and weaker US Gulf Coast heavy oil pricing.
The Canadian dollar averaged $0.79 in fourth-quarter 2021, largely flat with third-quarter 2021.
US oil and gas producers
ExxonMobil had fourth-quarter 2021 earnings of $8.9 billion and full-year earnings of $23 billion. Capital and exploration expenditures were $5.8 billion in the fourth quarter and $16.6 billion for full-year 2021.
Oil-equivalent production in the fourth quarter was 3.8 million b/d. Excluding entitlement effects, divestments, and government mandates, oil-equivalent production increased 2% versus the prior-year quarter.
ExxonMobil continued to advance its low cost of supply from deepwater developments in Guyana, with estimated recoverable resources increasing to about 10 billion boe, supported by 6 commercial discoveries in 2021. The sale of certain UK North Sea assets to Neo Energy was also completed in December 2021.
ExxonMobil’s global refining margins improved from the third quarter with increased transportation demand driven by easing mobility restrictions, partly offset by higher energy prices in Europe. Refining throughput in the quarter was the highest since 2013, up 2% from the third quarter.
Chevron reported earnings of $5.1 billion for fourth-quarter 2021, compared with a loss of $665 million in fourth-quarter 2020. Included in the quarter were asset sale gains of $520 million, losses on the early retirement of debt of $260 million, and pension settlement related costs. Adjusted earnings of $4.9 billion in fourth-quarter 2021 compared to adjusted earnings of $298 million in fourth-quarter 2020.
Chevron had full-year 2021 earnings of $15.6 billion, compared with a loss of $5.5 billion for full-year 2020. Adjusted earnings of $15.6 billion in 2021 compares to adjusted earnings of $172 million in 2020.
Chevron’s worldwide net oil-equivalent production was 3.12 million b/d in fourth-quarter 2021, a decrease of 5% from a year ago. Worldwide net oil-equivalent production for the full-year 2021 was 3.1 million b/d, a slight increase from a year ago.
In the downstream sector, Chevron’s US refinery crude oil input in fourth-quarter 2021 increased 9% to 882,000 b/d from the year-ago period, in response to higher demand and improved refining margins. International refinery crude oil input of 602,000 b/d in fourth-quarter 2021 increased 11% from the year-ago level.
ConocoPhillips had fourth-quarter 2021 earnings of $2.6 billion, compared with a fourth-quarter 2020 loss of $772 million. Excluding special items, fourth-quarter 2021 adjusted earnings were $3 billion, compared with a fourth-quarter 2020 adjusted loss of $201 million. Special items for the current quarter were primarily comprised of non-cash impairments related to the company’s existing investment in APLNG and noncore assets in Lower 48, partially offset by a gain on Cenovus Energy equity.
ConocoPhillips’ full-year 2021 earnings were $8.1 billion, compared with a full-year 2020 loss of $2.7 billion. Excluding special items, full-year 2021 adjusted earnings were $8 billion, compared with a full-year 2020 adjusted loss of $1 billion.
Production excluding Libya for fourth-quarter 2021 was 1.56 MMboe/d, an increase of 423,000 boe/d from the same period a year ago. After adjusting for closed acquisitions and dispositions as well as impacts from conversion of Concho two-stream contracted volumes, fourth-quarter 2021 production increased by 70,000 boe/d, or 5% from the same period a year ago. This increase was primarily due to new production from Lower 48 and other development programs across the portfolio, partially offset by normal field decline. ConocoPhillips’ production remained unhedged and thus realized the full benefit of higher marker prices.
Occidental Petroleum had net income for the fourth quarter of $1.3 billion, and adjusted income of $1.4 billion. Full-year 2021 adjusted earnings were $2.55 billion, compared with a full-year 2020 adjusted loss of $3.68 billion.
Occidental’s global production from continuing operations averaged 1.19 MMboe/d for the fourth quarter, exceeding the midpoint of guidance by 49,000 boe/d. Production from the Permian, Rockies, and Gulf of Mexico all exceeded the high end of guidance.
The company’s chemical pre-tax income of $574 million for the fourth quarter compared to prior quarter income of $407 million. The improvement in fourth quarter income resulted primarily from higher realized prices, volumes, and margins across most product lines, partially offset by higher energy costs.
Hess had net income of $265 million in fourth-quarter 2021, compared with a net loss of $97 million in fourth-quarter 2020. Net production, excluding Libya, was 295,000 boe/d in fourth-quarter 2021, compared with 309,000 boe/d in fourth-quarter 2020. Hess also made significant new discoveries offshore Guyana during the quarter.
US independent refiners
Phillips 66 noted fourth-quarter 2021 earnings of $1.3 billion, compared with earnings of $402 million in third-quarter 2021. Excluding special items, the company had adjusted earnings of $1.3 billion in the fourth quarter, compared with third quarter adjusted earnings of $1.4 billion.
Phillips 66’s refining segment had fourth-quarter 2021 pre-tax income of $346 million, compared with a pre-tax loss of $1.1 billion in third-quarter 2021. Third-quarter results included a $1.3 billion impairment of the Alliance refinery.
The increase in refining income was primarily due to higher realized margins and improved volumes, partially offset by higher costs. Realized margins for the fourth quarter were $11.60/bbl, up from $8.57/bbl for the third quarter. Pre-tax turnaround costs for the fourth quarter were $106 million, compared with third-quarter costs of $81 million. Crude utilization rate was 90% and clean product yield was 86% in the fourth quarter.
Valero Energy had net income of $1 billion for fourth-quarter 2021, compared to a net loss of $359 million for fourth-quarter 2020. Fourth-quarter 2021 adjusted net income was $1 billion, compared to an adjusted net loss of $429 million for fourth-quarter 2020.
For full-year 2021, Valero’s net income was $930 million compared to a net loss of $1.4 billion in 2020. Adjusted net income was $1.15 billion in 2021 compared to an adjusted net loss of $1.26 billion in 2020.
Valero’s refining segment reported $1.3 billion of operating income for fourth-quarter 2021, compared to a $377 million operating loss for fourth-quarter 2020. Refinery throughput volumes averaged 3 million b/d in fourth-quarter 2021, 483,000 b/d higher than fourth-quarter 2020.
Valero’s renewable diesel segment, which consists of the Diamond Green Diesel (DGD) joint venture, reported $150 million of operating income for fourth-quarter 2021, compared to $127 million for fourth-quarter 2020. Renewable diesel sales volumes averaged 1.6 million gallons/day (gpd) in fourth-quarter 2021, which was 974,000 gpd higher than fourth-quarter 2020. The higher operating income and sales volumes in the fourth quarter were primarily attributable to the startup of the DGD expansion project during the quarter.
Marathon Petroleum reported net income of $774 million for fourth-quarter 2021, compared with net income of $285 million for fourth-quarter 2020. Adjusted net income was $794 million for fourth-quarter 2021. This compares to an adjusted net loss of $608 million for fourth-quarter 2020.
Refining and Marking (R&M) segment income from operations was $881 million in fourth-quarter 2021, compared with a loss of $1.6 billion for fourth-quarter 2020. Refining planned turnaround costs totaled $204 million in fourth-quarter 2021 and $107 million in fourth-quarter 2020. R&M margin was $15.88/bbl for fourth-quarter 2021, versus $7.42/bbl for fourth-quarter 2020. Crude capacity utilization was 94% for fourth-quarter 2021, resulting in total throughput of 2.9 million b/d.
Canada firms
All financial figures are presented in Canadian dollars unless noted otherwise.
Suncor’s net earnings were $1.55 billion in fourth-quarter 2021, compared to a net loss of $168 million in the prior year quarter.
Suncor’s total upstream production was 743,300 boe/d in fourth-quarter 2021, compared to 769,200 boe/d in the same period a year ago. The decrease reflected lower production from the company’s exploration and production (E&P) assets due to the sale of the Golden Eagle Area Development early in the quarter.
The company’s synthetic crude oil (SCO) production in fourth-quarter 2021 was 515,000 b/d, compared to 514,300 b/d in fourth-quarter 2020, mainly due to the utilization of 96% of the combined upgrader.
Fort Hills resumed two-train operations late in fourth-quarter 2021. The company is on track to operate the Fort Hills asset at average utilization rates of 90% throughout 2022. Buzzard Phase 2, which is expected to extend production life of the existing Buzzard field, achieved first oil in the fourth quarter.
Suncor’s refinery utilization averaged 96% and crude throughput was 447,000 b/d in fourth-quarter 2021, compared to 95% and 438,000 b/d respectively in the prior year quarter.
Canadian Natural Resources reported net earnings of $2.53 billion and adjusted net earnings from operations of $2.63 billion for fourth-quarter 2021. The company delivered record average quarterly production volumes of 1.3 MMboe/d, increases of 9% and 6% over the fourth-quarter 2020 and third-quarter 2021 levels, respectively.
Cenovus Energy recorded a net loss of $408 million in the fourth quarter, compared with third-quarter net earnings of $551 million. The net loss primarily resulted from a non-cash impairment of $1.9 billion in the US manufacturing segment.
In the fourth quarter, Cenovus achieved upstream production of 825,300 boe/d, including record average daily oil sands production of almost 251,000 b/d at Christina Lake and nearly 212,000 b/d at Foster Creek.
Downstream revenues rose to about $8.1 billion compared with $7.5 billion in the third quarter, largely driven by higher average refined product pricing. Total downstream operating margin fell to $42 million compared with $268 million in the third quarter, largely due to the elevated operating costs in the US manufacturing segment.
Imperial Oil reported net income of $813 million for fourth-quarter 2021, down from net income of $908 million in third-quarter 2021. Fourth quarter results, which reflected continued strong operating performance and commodity prices, were partially offset by extreme cold weather impacts on the company’s oil sands mining operations in December, and a number of unrelated one-time earnings charges of about $160 million. Estimated net income was $2.5 billion for full-year 2021, the highest since 2014.
Imperial Oil’s upstream production in the fourth quarter averaged 445,000 boe/d, bringing annual production to 428,000 boe/d, the highest annual production in over 30 years. In the downstream, throughput in the fourth quarter continued to increase, averaging 416,000 b/d. Capacity utilization was 97%. Full-year throughput averaged 379,000 b/d with capacity utilization of 89%.
Chemical fourth-quarter net income was $64 million with full-year net income of $361 million, the highest full-year net income in over 30 years, driven by strength in polyethylene margins and strong operating performance.
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.