Rare profit does little to mute oil pessimism
Energy companies continue to deliver poor first-quarter financial results amid the coronavirus pandemic and the historic oil crash.
Driller Callon Petroleum was the only company of the three reporting Monday that made a profit in the first quarter, but even with a showing increasingly rare in the industry, the company was planning for worse days ahead.
Meanwhile pipeline operator Energy Transfer and oilfield service company Weatherford International each said they had losses approaching a billion dollars.
Weatherford returned to the red in the first quarter just a few months after emerging from bankruptcy. The company said it lost $966 million in the quarter, doubling the $481 million it lost in the first quarter of 2019.
Revenue declined by 10 percent to $1.2 billion compared with $1.3 billion in the same quarter a year earlier.
While revenue remained steady, the company took a hit as it reduced the value of assets by $807 million.
Weatherford, with headquarters in Switzerland and principal offices in Houston, emerged from bankruptcy as a reorganized company in December after a fivemonth legal process. A return to a loss comes months after the company posted its first profit in five years — $5.3 billion in 2019’s fourth quarter.
Also Monday, Energy Transfer, a Dallas-based pipeline operator, lost $855 million, nearly a 180-degree turn from the $870 million it made in the same quarter a year earlier. Revenue declined by 11 percent to $11.6 billion from $13.1 billion in the first quarter of 2019. The company, like others in the industry battling a historic oil downturn, was hit by a $1.3 billion writedown in the value of assets.
In response, Energy Transfer said it will cut $400 million from a $4 billion capital budget, and executives say they could cut an additional $300 million to $400 million, if necessary.
The loss, Energy Transfer’s first since 2013, comes one quarter after it made a record $1 billion during the fourth quarter of 2019, the most profitable quarter in the company’s 25-year history.
It was a troubling first quarter for the company, which in March was stung by the announcement that Anglo-Dutch oil supermajor Shell was dropping out of a joint venture to develop the Lake Charles LNG export terminal in Louisiana. Energy Transfer plans to develop the liquefied natural gas project alone.
Monday’s only bright spot was Callon Petroleum, which reported earnings of $216.6 million, up from a loss of $19.5 million in the same period a year ago. Revenue nearly doubled to $290 million, up from $153 million a year ago.
But the news was met with further planning for what could be an even more difficult second quarter for the industry. The Houstonbased company said it had suspended well completions and is idling more rigs in response to the coronavirus-driven oil crash.
It stopped completing wells in April and plans to operate just one drilling rig by mid-May. The company plans to spend no more than $600 million on oil exploration and production this year.
“The rapid drop in commodity prices has disrupted our industry and placed everyone in the position to re-evaluate their current plans and forecasts,” CEO Joe Gatto said in a statement. “Beginning in early March, our team began taking decisive action to align our activity levels with the current economic environment.”
Callon has reduced compensation for its CEO and board of directors by 35 percent, and plans a 25 percent reduction in compensation for other executives, while also suspending hiring and cutting jobs.