Oil ex­plor­ers re­port­ing $14b in 2015 losses

The Pak Banker - - MARKETS/SPORTS -


Dur­ing the next eight days, in­de­pen­dent U.S. oil ex­plor­ers are ex­pected to re­port 2015 losses to­tal­ing al­most $14 bil­lion, the re­sult of the steep­est price col­lapse in a gen­er­a­tion.

Hess Corp. kicks off earn­ings sea­son for the com­pa­nies on Wed­nes­day with what an­a­lysts pre­dict will be an an­nual loss of $1.6 bil­lion, its worst per­for­mance in at least 28 years. It will be fol­lowed by peers in­clud­ing Mur­phy Oil Corp. and Anadarko Pe­tro­leum Corp., which also have been squeezed by a crude drop of more than 70 per­cent since June 2014.

"It's not go­ing to be pretty," said Carl Larry, head of oil and gas for Frost & Sul­li­van LP in Hous­ton.

In­vestors have pun­ished oil and gas ex­plor­ers, wip­ing out more than $300 bil­lion in mar­ket value for the com­pa­nies in the Bloomberg In­tel­li­gence North Amer­ica In­de­pen­dent E&Ps Val­u­a­tion Peer Group in the past year. Dis­tressed debt ex­changes and bank­rupt­cies are mount­ing. The com­pa­nies have fired thou­sands of work­ers, aban­doned drilling projects, cut div­i­dends and re­struc­tured debt to con­serve cash and fend off in­sol­vency.

For most in­de­pen­dent ex­plor­ers -- those that don't also own re­finer­ies and retail gaso­line sta­tions -- cash flows have been "dec­i­mated" by the de­cline in oil prices, a team of an­a­lysts at Wells Fargo Se­cu­ri­ties LLC in­clud­ing David Tameron and Gor­don Douthat said in a note to clients on Jan. 25.

Af­ter spend­ing the past half decade slim­ming down from an owner of re­finer­ies, fill­ing sta­tions and oil wells to a pure-play crude ex­plorer, Hess may have few as­sets left to sell if it finds it­self need­ing to raise cash, Fitch Rat­ings said in a re­port this month. Hess cut its 2016 drilling bud­get by 40 per­cent to $2.4 bil­lion on Tues­day.

The New York-based pro­ducer's per-share fourth-quar­ter loss, ex­clud­ing one-time items, is ex­pected to be $1.46, based on the av­er­age of 22 an­a­lysts' es­ti­mates com­piled by Bloomberg. That's the big­gest es­ti­mated loss among the 61 com­pa­nies in the BI E&Ps group.

Later on Wed­nes­day, Mur­phy Oil is ex­pected to post a full-year loss of $1.8 bil­lion, which would be the worst 12-month re­sult for the driller since at least 1987, ac­cord­ing to data com­piled by Bloomberg. Anadarko Loss Anadarko is next in line with re­sults on Feb. 1. The pro­ducer is ex­pected to post a $6 bil­lion loss for last year, which would also be its worst re­sult since at least 1987. Anadarko has been clob­bered by both the fall in oil and tum­bling prices for nat­u­ral gas, which is more than 60 per­cent of the com­pany's out­put.

Oc­ci­den­tal Pe­tro­leum Corp. and Cono­coPhillips are ex­pected to post full-year losses of $2.74 bil­lion and $ 1.58 bil­lion, re­spec­tively, on Feb. 4. For Oc­ci­den­tal, that would rep­re­sent the steep­est an­nual de­cline since at least 1987. Cono­coPhillips hasn't re­ported an an­nual loss on that scale since 2008. Both com­pa­nies are based in Hous­ton.

The com­bined es­ti­mated loss for those five com­pa­nies is $13.8 bil­lion.

"It's go­ing to be in­ter­est­ing to see what the com­pa­nies do with their 2016 bud­gets," said Michael Scialla, an an­a­lyst at Stifel Ni­co­laus & Co. in Den­ver. "Most have said they plan to stay within their cash flows but with oil now down around $30, I think they're go­ing to be forced into some dra­co­nian cuts."

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