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Big Oil Profits Surge in First Quarter
ExxonMobil Corp.’s profits in the first three months of 2011 eclipsed its peers on higher natural gas production and solid chemical returns, harkening back to the industry’s boom days before the late 2008 global economic collapse. Chevron Corp., BP plc, ConocoPhillips and Royal Dutch Shell plc were among several big producers also reporting profitable results.
In the midst of talk by the Obama administration to cut oil and gas subsidies because of oil profits, the world’s largest public company reported that earnings were $10.65 billion, up 69%, or $4.35 billion from the year-ago quarter. However, earnings fell about $4 billion short of the record $14.8 billion in profits reported in 3Q2008 (see NGI, Nov. 3, 2008). Several analysts said if oil prices remain high, ExxonMobil could eclipse earlier profit records by the end of 2011.
What has changed since late 2008 is natural gas production, which has reversed course in part to the $41 billion acquisition of XTO Energy Inc. in late 2009 (see NGI, Dec. 21, 2009). Gas output in the latest period climbed 24% year/year to 14.53 Bcf/d from 2.84 Bcf/d, driven by U.S. unconventional gas volumes gained mostly from the merger with XTO, as well as liquefied natural gas project ramp-ups in Qatar. Oil output, meanwhile, fell by 15,000 boe/d; excluding production sharing contracts and other factors, oil production would have been up by 2%.
The integrated ExxonMobil/XTO crews drilled 900 onshore wells in 2010, and “we’ve drilled 200 so far this year…So we are doing well…and the results to date are reasonable” when viewing company guidance, said Investor Relations Chief David Rosenthal (see NGI, March 14).
Chevron, the second-largest U.S. oil company, on Friday reported that its first quarter profits jumped to $6.2 billion ($3.09/share) from $4.6 billion ($2.27) a year earlier. Revenue rose 23% to $58 billion. However, oil and gas production fell almost 1% y/y to 2.76 million boe/d.
The San Ramon, CA-based producer has begun working on its Moccasin prospect in the deepwater Gulf of Mexico (GOM) and is awaiting approvals for three more developments. The company remains committed to the GOM even under the new federal regulatory regime, said Chevron’s Gary Luquette, president of North America Exploration and Production (see related story).
BP’s big headline last week was its optimism about returning to the deepwater GOM by the end of the year (see related story). However, the company also is making good progress on plans to sell $30 billion in assets by the end of this year, CFO Byron Grote said. To date around $24 billion in sales have been completed or announced.
“As I hope is clear, BP is in the midst of major change as we work to reset the focus of the company and begin the task of rebuilding long-term sustainable value for our shareholders,” said Grote. “We are keenly aware of the loss of value that has occurred over the last year, and how deeply discounted we are today relative to both the value of our assets and our financial performance versus our peers.
BP reported a profit of $7.1 billion in 1Q2011, up $1 billion from the year-ago period. Replacement cost profits, which strip out gains or losses from inventories and other nonoperating items, slipped to $5.5 billion from $5.6 billion. The company took an additional $400 million charge in the latest quarter related to the GOM oil spill, which is on top of the $41 billion already written off related to liabilities. Because of asset sales and high oil prices, revenue jumped almost 19% y/y to $88.3 billion from $74.42 billion.
Production in the quarter totaled 3.58 million boe/d, which is 11% lower than in the year-ago period. However, after accounting for asset sales, BP’s output fell 7% y/y. BP expects 2Q2011 production “to reflect the continued impact on operations in the Gulf of Mexico following the drilling moratorium, the impact of acquisitions and divestments, and the seasonal ramp-up in turnaround activity, which is expected to be higher than in 2010.”
Shell, which also has returned to drilling in the GOM, said its quarterly net profits jumped 60% from a year ago to $8.78 billion from $5.48 billion. Group revenues rose to $114.84 from $88.03 billion. Shell’s clean current cost of supplies, which strips out gains or losses from inventories and other nonoperating items, was $6.29 billion in 1Q2011, compared with $4.82 billion in 1Q2010.
Total oil and gas production in the latest quarter was 3.504 million boe/d, down 3% from a year ago (see related story). Production in the quarter increased by 230,000 boe/d from new field start-ups and the continuing ramp-up of fields, which more than offset the impact of field declines, Shell said. Liquefied natural gas sales volumes totaled 4.42 million tons in 1Q2011, 4% higher than in the year-ago period.
Houston-based ConocoPhillips is prioritizing unconventional plays in North America going forward, CFO Jeff Sheets said last week. U.S. and Canadian gas production is “a shrinking part of the portfolio,” but the company has more than enough onshore work in unconventional oil plays to remain busy.
The most promising onshore play, he said, is the Eagle Ford Shale, where the company is producing around 20,000 boe/d; at the end of March output was 71% weighted to liquids. ConocoPhillips plans to be running 14 rigs there by the end of the year. The producer has a total of 20 rigs running today in the U.S. onshore, and “all of the Lower 48 will have twice as many rigs by year-end than in the first quarter of last year.” By the end of this year the onshore plays are expected to produce a total of around 65,000 boe/d.
The company reported quarterly earnings of $3 billion, up from $2.1 billion a year earlier. Excluding gains from asset sales, adjusted earnings were $2.6 billion ($1.82/share).
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