Winter storm continues to put freeze on oil and gas industry
Six weeks later, the fallout from Texas’ brutal winter storm continues to roll through the the oil and gas industry.
Exxon Mobil said last week that it expects firstquarter earnings to be reduced by as much as $800 million because of the deep freeze that plunged Texas into darkness for several days beginning Feb. 15.
Even so, the Irvingbased oil giant probably returned to profit after four-straight losses. Rebounding oil and natural gas prices increased earnings by as much as $2.7 billion while improved refining and chemical margins added up to $1.1 billion, the company said Wednesday in a filing.
Exxon, which is expected to release its firstquarter earnings report in four to five weeks, was forced to shut or reduce runs at its large refining and petrochemical plants along the Gulf Coast. But the filing last week also showed that its oil and gas production facilities also suffered substantial reductions in earnings.
The arctic blast, blamed for some 200 deaths across the state, wreaked havoc on gas and power markets, minting winners and losers among energy suppliers.
Power bankruptcies
Entrust Energy, a Houston-based retail power company, filed for bankruptcy last week, joining a growing number of power companies seeking Chapter 11 protection in the wake of February's power crisis that drove the cost of wholesale power to $9,000 per megawatt hour.
Among the claims against the company are one worth $1.6 million by JPMorgan Chase over a Paycheck Protection Program loan and a $270 million bill from ERCOT, the state's grid manager, which Entrust disputes.
The Electric Reliability Council of Texas ousted Entrust from the Texas wholesale power market in March after the company failed to make payments on power purchases during the crisis. Entrust, which provides electricity for more than 170,000 customers across eight states, joins Just Energy Group and Griddy Energy in declaring bankruptcy after the storm.
Restarting refineries
Some of the biggest losers during the deep freeze were refineries, including 18 of the 30 in the state that were brough down. While two still haven’t restarted, many more are struggling to get back to full speed. It’s an old story: Refineries don’t respond well to being restarted after unplanned total shutdowns, be it from winter storms, hurricanes or flooding.
Refiners are anxious to restart because after cutting processing rates for more than a year due to the pandemic, the market now beckons with gasoline demand at its highest since October and profit margins rising.
Total’s Port Arthur refinery had to shut its sole gasoline-making unit on March 26 and it may be down three to four weeks.
Chevron’s Pasadena refinery on the Houston Ship channel still needs to complete the restart of at least three operations, including a gasoline-making unit.
There was at least one winner, however, during the storm, but not in Texas.
California Resources, which drills and produces crude exclusively in its namesake state, said its natural gas trading business generated a profit as a result of the storm, though the magnitude of the bonanza won’t be disclosed until the quarter is out.