Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Global oil producers rewind the clock on profit with price crash

Market news
Market news

Big Oil’s profit engine has gone into reverse, taking it back to the days when oil was just $28 a barrel.

Profits from global explorers’ oil and gas wells for the first quarter of 2015 revisit the early 2000’s, just before demand from China began driving commodity prices upward.

Exxon Mobil Corp.’s oil and gas earnings dropped by almost two-thirds to the lowest since 2003, spurring a 46 percent decline in overall profit from a year earlier, the company said on Thursday.

ConocoPhillips’ net income plunged 87 percent — its worst results for any first quarter since 2001, according to data compiled.

Royal Dutch Shell Plc posted a 56 percent decline in profit for the quarter.

The good news is prices already have shown some recovery with Brent crude, the global benchmark, climbing 21 percent to more than $66 a barrel in April after falling below $50 in January.

The bad news is the industry still has a long way to go to adjust to a new normal that’s half the price they’d grown used to in recent years.

“Often when things are great, the expectations going forward are too positive,” said Brian Youngberg, an oil analyst at Edward D. Jones & Co. in St. Louis.

“The same thing happens when oil prices are low: everyone says the sky is falling. But every company I follow has beaten the estimates” for the first quarter.

The last time the chief executive officers of the world’s biggest crude producers experienced such low profits, most hadn’t even entered the ranks of senior management and a barrel of oil fetched less than $30.

Between 2003 and the end of 2013, China’s appetite for crude expanded by about 85 percent to more than 10 million barrels a day, according to the US Energy Department’s statistical arm.

To cope with the current price drop, explorers and the companies that help them drill and complete wells have been firing workers, consolidating offices, selling oil fields and postponing big projects to conserve cash.

The pain has rippled into other industries that support oil, such as Wisconsin sand mines that provide granules to prop open microscopic rock fissures, and Illinois steel mills that make pipes.

The latest crude price rebound has reversed the free-fall of previous months and provided much-needed upward momentum to the beleaguered oil sector.

And it’s a welcome sign to executives caught by surprise by the severity of the current downturn despite their familiarity with the industry’s boom-and-bust cycles.

For companies like Exxon, which pumps more oil every day than half the members of OPEC, the stakes are especially high. The world’s biggest oil companies have refining businesses that profit when oil is lower, helping moderate the impact of a market crash.

But while Irving, Texas-based Exxon boasts a sprawling international network of refineries that haul in almost 80 percent of the company’s sales revenue, 80 percent of Exxon’s profit comes from its oil and gas wells, according to data compiled.

The picture is similar at other members of the Big Oil fraternity. Royal Dutch Shell Plc generates 11 percent of revenue but 82 percent of profit from oil and gas wells; for Chevron Corp., the so-called upstream accounts for 16 percent of sales and 88 percent of profit.

ConocoPhillips had such confidence in its upstream that it forsook its refineries entirely in a 2012 divorce that spun the business off to shareholders.

Phillips 66 now stands as a separate publicly traded company and the largest refiner in the US that’s not part of a big oil company.
Staying Cautious

So any optimism from the latest price recovery remains overshadowed by caution. Brent crude — the benchmark for most of the oil bought and sold outside the US — is still down more than 40 percent from its pre-crash level in late June, when it topped $115 a barrel.

Exxon Chairman and Chief Executive Officer Rex Tillerson warned a Houston conference hall full of analysts and investors earlier this month that low prices may persist for years.

His vice president of investor relations, Jeff Woodbury, echoed that sentiment during a webcast on Thursday. The company is concerned about all the oil supplies piling up in storage tanks that will have to be sold off before prices can rebound significantly, Woodbury said. Oil producers are stuck with whatever price the market offers.

“We’re price takers,” he said. “We just focus on those things we can control.”

Recommended for you

More from Energy Voice

Latest Posts