Energy firms report gush in profits
Tentative recovery moving to firmer ground as demand rises, stockpiles fall
Big energy companies posted surging third-quarter profits this week, extending a nearly yearlong comeback for Houston’s most important industry after an oil bust bankrupted scores of companies and led to thousands of job losses.
Exxon Mobil and Chevron, the two largest U.S. oil producers, each reported Friday that profits rose more than 50 percent while Houston’s ConocoPhillips, the third largest, said Thursday that it
swung to a $400 million profit after losing $1 billion a year ago. All said they were boosted by rising U.S. oil prices that settled at nearly $54 a barrel Friday.
The Houston refiner Phillips 66, chemical maker LyondellBasell and energy service companies Schlumberger and Halliburton also reported strong profits this week, suggesting the tentative recovery is moving to firmer ground as fuel demand rises, stockpiles decline and companies hire workers by the thousands. Oil and gas companies have added some 30,000 field workers in Texas over the past year — nearly a third of the jobs they cut here during the downturn — to work active drilling rigs and hydraulic fracturing equipment in the Permian Basin and elsewhere.
“We never know if we’re totally out of it yet, but things are looking positive,” said Brian Young-
berg, an analyst at Edward Jones in St. Louis. “Higher oil prices are a big tailwind they have now.”
U.S. oil prices rose $1.26 to settle at $53.90 a barrel in New York on Friday, the highest point since late February, and Brent, the international oil benchmark, climbed above $60 a barrel for the first time in two years.
Shrinking inventories
Prices have risen in recent weeks as Saudi Arabia and other OPEC producers have limited crude production and appear poised to extend output cuts until the end of next year as data shows global oil supplies and demand are beginning to come into balance after a prolonged glut. In the U.S., fuel stockpiles continue to fall, with total petroleum inventories shrinking by 12.2 million barrels last week, according to the Energy Department.
The Energy Department estimates that oil inventories around the world fell by 500,000 barrels a day in the third quarter, extending the longest draw of global stockpiles in three years. Meanwhile, the International Energy Agency recently reported that worldwide oil demand has risen faster than expected, with an increase of 2.3 million barrels a day in the second quarter.
The global energy job market appears to have stabilized as well. NES Global Talent, a recruiting firm in the United Kingdom, said a recent survey of energy companies showed that 89 percent plan to increase staff over the next year, and 60 percent expect to significantly step up recruiting.
Analysts still expect a slow climb for oil prices and the industry as oil supplies, while perhaps shrinking, remain plentiful. And while the recovery is proceeding, it remains uneven, with the offshore sector still struggling as prices, while much improved from the $26 a barrel low point in early 2016, remain too low to justify the massive investment needed to develop deepwater fields.
More rigs in Permian
Exxon and Chevron both plan to send more drilling rigs to the prolific oil fields in West Texas. But they and other oil companies remain cautious of volatile oil markets, where, only a few months ago, prices were sliding toward $40 a barrel. Exxon and Chevron touted strategies to remain frugal, seeking to pump oil more efficiently, as investors push for increased financial discipline.
“We’re being returnsfocused and we’re spending our money on what we think will be most economic,” Chevron CEO John Watson told investors Friday. “The outcomes we’ve achieve have largely been a function of the commodity price environment. We made $26 billion when oil was high and we make nothing when oil was $42.”
Exxon spokesman Jeff Woodbury said the Irvingbased oil company plans to increase its fleet of drilling rigs from 20 to 30 in the Permian Basin in West Texas by the end of next year and begin drilling horizontal wells that run sideways for 3 miles, in an effort to boost the amount of oil and gas it pumps by 20 percent by 2025. But he cautioned the company is still highly selective in its investment plans.
“What we’re trying to do is well within our means,” he said.
A boost after Harvey
Exxon posted a 50 percent increase in profits in the third quarter, even though Hurricane Harvey’s floodwaters cost Exxon some $160 million after two major Gulf Coast facilities were disabled for weeks. The company earned $3.9 billion, or 93 cents a share, compared with $2.7 billion, or 63 cents a share, in the same three months a year earlier, on revenues that jumped 13 percent to $66.2 billion.
Meanwhile, Chevron’s multibillion-dollar push into the Permian has lifted oil production there by 30 percent over the past year. Chevron recently put its 15th rig to work in the Permian, and it plans to boost its fleet to 20 rigs over the next year.
Chevron reported a 54-percent jump in net income, banking $2 billion, or $1.03 a share, in the July-September period, compared with $1.3 billion, or 63 cents a share, in the same three months last year. Revenue rose from $29.2 billion to $33.9 billion.
“They’re focusing on the big picture of maximizing returns rather than maximizing growth,” Youngberg said. “That should help push oil prices higher.”
The increased number of working drilling rigs and rising demand for equipment and services in the Permian Basin has benefited Houston’s oil field service companies, including Halliburton and Schlumberger.
On Monday, Halliburton said its third-quarter profits came in at $365 million, up from just $7 million this time last year, and its revenues climbed 42 percent to $5.4 billion, with almost 60 percent of that coming from North America. Its top oil field services rival, Schlumberger, last week reported a $545 million third-quarter profit, and CEO Paal Kibsgaard credited almost all of the growth to surging activity in North America.
Meanwhile, Houston refiner Phillips 66 said its profits rose more than 60 percent to $823 million. Its refining profit margins doubled over last year after Hurricane Harvey drove gasoline and diesel profit margins higher as prices spiked nationwide. Those fatter margins came even though the storm knocked out the company’s Sweeny refinery outside of Houston in September.
Chemical maker LyondellBasell posted a nearly $1.1 billion quarterly profit, up 11 percent over last year. Hurricane Harvey shut down much of its Texas Gulf Coast operations temporarily, but higher chemical profit margins — the result of a global supply cut after the storm — bolstered LyondellBasell’s bottom line.