Royal Dutch Shell (RDS.A) and BP’s (BP) earnings fell in the third quarter. While BP’s profits fell 41%, Shell’s earnings fell 15%. However, analysts expected a steeper fall in both companies’ earnings. So, a lower-than-expected fall in the profits was a positive surprise for the equity market.
Shell and BP beat earnings estimate
Shell’s adjusted earnings fell 15% to $4.9 billion—less than the 26% fall forecasted by analysts. The company’s adjusted earnings per ADS of $1.18 beat analysts’ estimate of $0.99. Similarly, BP’s adjusted earnings fell 41% to $2.3 billion in the third quarter—lower than analysts’ anticipated fall of 48%. The company’s adjusted EPS per ADS of $0.66 beat the estimate of $0.59.
Shell and BP’s earnings
What surprised the market the most was the rise in the earnings in Shell’s Integrated Gas and Downstream segments 17% YoY and 7% YoY. The segments’ earnings rose despite the fall in oil, gas, and LNG realizations and refining margins. The company’s profits rose in these segments due to high trading activities and higher marketing margins. However, Shell’s upstream earnings fell 52% YoY in the quarter due to lower realizations.
BP’s earnings fell across its business segments. The company’s Upstream, Downstream, and Rosneft segments’ adjusted EBIT fell 47%, 11%, and 8% YoY, respectively. However, the company’s upstream volumes rose in the quarter.
Shell’s production fell, BP’s rose
While Shell’s upstream production fell 0.9%, BP’s upstream production rose 4.4%.
Shell’s production was 3.56 MMboed (million barrels of oil equivalent per day) in the third quarter. The global production fell due to natural declines, increased maintenance activities, asset sales, and weaker operational results. However, more production from assets in Trinidad and Tobago and Australia supported the total output.
BP’s upstream production rose 4.4% to 2.57 MMboed despite the disruptions caused by Hurricane Barry in the US Gulf of Mexico.
Shell and BP stock performance
Since October 29, the beginning of the earnings releases, both stocks have seen marginal changes. While Shell stock has fallen 0.8%, BP stock has risen 0.3%. BP’s upstream volume growth might have lifted the sentiments in the stock. Also, Shell’s positive surprises in terms of the earnings beat and segmental growth prevented a free fall in the stock.
During the same period, peers and equity markets have risen. The S&P 500 Index (SPX) has increased 1.3% since October 29. ExxonMobil (XOM), Chevron (CVX), and Suncor Energy (SU) have increased 4.4%, 2.6%, and 3.1%, respectively. Also, oil prices have increased 1.3% since October 29.
While Shell and BP’s earnings fell, Shell’s earnings fell less than BP’s earnings. Also, Shell’s profits rose in a few of its segments despite harsh business conditions. The increase shows the company’s operational strength. Although Shell’s upstream volumes fell marginally, they’re still higher than BP’s upstream volumes. The numbers show that Shell’s upstream portfolio is strong.
ExxonMobil and Chevron’s earnings also fell in the third quarter. ExxonMobil’s adjusted profits fell 53% YoY, while Chevron’s adjusted earnings fell 37% YoY. Both companies saw a decline in all of their segments in the quarter.
ExxonMobil’s reported and adjusted EPS was higher than analysts’ forecast. However, Chevron’s reported EPS missed the estimates. Chevron’s adjusted EPS was higher than the forecast.
Read ExxonMobil or Chevron: Which Performed Better in Q3? to learn more.