XOM, CVX, RDS, BP: Will Energy Earnings Fall in Q3?

Integrated energy stocks slumped in the third quarter. Lower oil prices, equity market volatility, and macro concerns hammered the stocks. We’ll see how they were affected when energy companies release their results. For now, let’s look at estimates for ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP).

Third-quarter earnings estimates for energy stocks

In the third quarter, analysts expect energy companies’ earnings to fall. They forecast Chevron’s, Shell’s, BP’s, and ExxonMobil’s EPS falling 15%, 15%, 34%, and 41% YoY (year-over-year), respectively, due to lower oil prices and weak refining conditions. As a result, upstream realizations could be lower and downstream margins could be narrower.

In the second quarter, ExxonMobil’s and Shell’s EPS fell 21% and 25% YoY, respectively. Meanwhile, Chevron’s and BP’s EPS fell 1% YoY.

XOM, CVX, RDS, BP: Will Energy Earnings Fall in Q3?

Energy companies’ upstream production

Oil prices fell 7.5% in the third quarter, with WTI prices falling 18.7% YoY to $56.40 per barrel and Brent prices falling 18.2% YoY to $62 per barrel. However, higher upstream volumes could offset these lower upstream realizations. In the second quarter, ExxonMobil’s and Chevron’s hydrocarbon production rose 7% and 9% YoY, respectively, and Shell’s and BP’s output rose 4% and 7% YoY.

In the second quarter, ExxonMobil had the highest hydrocarbon production, of 3.91 MMboed (million barrels of oil equivalent per day). Shell, Chevron, and BP produced 3.58, 3.08, and 2.63 MMboed in hydrocarbons, respectively.

Downstream conditions

The refining environment appeared mixed in Q3. While industry cracks expanded, oil spreads narrowed YoY.

The benchmark US Gulf Coast WTI 3-2-1 rose 13.9% YoY to $19.80 per barrel in the third quarter. However, the Canadian differential, the WTI-WCS, narrowed by 54.4% YoY to $12.50 per barrel, driven by supply constraints. The WTI Cushing-WTI Midland spread collapsed by 97.9% YoY to $0.30 per barrel.

Second-quarter earnings

Energy companies’ second-quarter earnings were dull due to lower upstream prices and thinner downstream margins. However, higher upstream output marginally offset those lower earnings.

In the second quarter, ExxonMobil’s upstream earnings rose, but its total profits fell 21% YoY to $3.1 billion due to lower downstream and chemical earnings. Meanwhile, Chevron’s adjusted earnings fell 1% YoY to $3.4 billion. Its upstream and downstream profits both fell.

Similarly, Shell’s earnings fell 26% YoY to $3.5 billion, and BP’s adjusted earnings fell 0.4% YoY to $2.8 billion. While BP’s earnings fell in its upstream, downstream, and Rosneft segments, Shell’s earnings plunged in its integrated gas, upstream, and downstream segments.