Effects of sagging oil prices ripple through the region
With picture mixed, signs of a retreat are emerging
Energy producers and oil equipment suppliers posted mixed earnings results for the second quarter on Thursday, telegraphing early signs of an industry pullback amid anemic oil prices.
Houston’s ConocoPhillips became the latest oil producer to plan a spending reduction, following similar announcements by Anadarko Petroleum Corp. in The Woodlands, Norway’s Statoil, New York’s Hess Corp. and Denver’s Whiting Petroleum Corp.
Investors and global market participants have waited to see if oil companies will scale back the ambitious plans they made when crude prices hovered above $50 a barrel. The price has languished below that mark for about two months but settled above $49 a barrel on Thursday.
Still, some oil company executives said they weren’t pinning their
hopes on a quick oil market recovery. Ben van Beurden, CEO of Royal Dutch Shell, said the company has adopted “a lower forever mindset,” trimming costs by $11 billion since 2014, when oil crashed.
ConocoPhillips
The nation’s largest independent oil company said it lost $3.4 billion in the second quarter as it wrote off the value of some assets. It plans to cut $200 million from its $5 billion annual spending budget but said it could still boost oil production by 3 percent this year.
The company has struck deals to sell off more than $16 billion in assets this year across in Canada, the Barnett Shale in North Texas, and elsewhere, and it plans to use that cash to pay down its debts and increase shareholder dividends. It cut its debt by $3 billion in the second quarter.
ConocoPhillips’ loss of $3.4 billion, or $2.78 a share, in the second quarter widened from its loss of $1.1 billion, or 86 cents a share, in the same period last year. Its quarterly revenue climbed from $5.6 billion to $8.8 billion from a year earlier.
The company recently added a sixth drilling rig to its operations in the Eagle Ford Shale in South Texas, and it has decided to extend two rig contracts in the Permian Basin in West Texas through year-end. It’s more drilling activity, but “it’s actually costing us less money,” Al Hirshberg, executive vice president at ConocoPhillips, said in a conference call.
Royal Dutch Shell
The European oil major has reached a record $38 billion in cash coming in from its operations selling oil, gas and petroleum products over the past year, but it said Thursday it would “remain disciplined” as crude prices languish below $50 a barrel.
Shell posted a $1.9 billion profit for the AprilJune period, up from $239 million this time last year. Its revenue jumped from $58.4 billion to $71.7 billion. And the company raised its oil production from 1.5 million barrels a day to 1.6 million barrels a day.
The company’s downstream earnings rose from $1.7 billion to $2.2 billion, amid strengthening sales of oil products and chemicals. Oil and gas production earned $339 million, compared with a loss of $1.3 billion last year.
Van Beurden said Shell would stick to the lower range of its expected capital budget this year, around $25 billion in investments.
“That’s affordable,” he said, in the “current economic environment.”
Patterson-UTI
The Houston drilling and pressure pumping contractor lost $92 million in the second quarter as it paid expenses on a multibillion-dollar acquisition and wrote down the value of some drilling equipment amid upgrades.
Its net loss of $92 million in the second quarter was larger than its loss of $86 million last year. The charges included $51.2 million in merger and integration related expenses and $29 million in a non-cash impairment on equipment.
The number of active rigs Patterson-UTI Energy deployed across the U.S. rose 23 percent to 100 in the April-June period, and it should rise to an average of 162 this month. The company upgraded seven more of its rigs to so-called super-spec status, and it has already contracts for five of those rigs for 18 to 24 months. Across the industry, the company believes there are 465 super-spec rigs — ones with more powerful drilling systems — across the U.S. and that more than 90 percent are currently working in the oil patches.
“Demand for high-spec rigs remains strong, despite moderating oil prices during the second quarter,” said Andy Hendricks, chief executive of Patterson-UTI.