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Shareholder returns from Big Oil show a split in production strategies
Big Oil's earnings for the first quarter of 2018 show a clear division in how companies are positioning themselves to weather a downturn caused by the drop in oil prices, which reached a four-year-low in April. Investors focused on the question of whether companies would reduce share repurchases because lower crude prices would mean that they would have less cash available to fund these programs. Investors' interest in the oil sector is largely driven by buybacks and dividends. Exxon Mobil, a US oil company, and Shell in the UK kept up their share buybacks. Chevron, a U.S. oil company, and BP (a UK-based oil company) said that they would decrease buybacks during the second quarter. The differences reflect where each company is at in its business cycle. Exxon's Guyana oilfield has produced prolifically, making it the largest offshore oil discovery in more than a decade. Exxon, a major player in both the Permian basin, the largest U.S. oilfield in terms of production, and in Guyana, has increased its production by 20 percent year-over-year. Exxon CEO Darren Woods said that both areas are highly lucrative and the company is trying to reduce its operational costs. Woods stated in the first-quarter earnings report of his company that "in this uncertain market our shareholders can have confidence in knowing that we are built for it." This week, oil prices fell to their lowest monthly level since 2021 as investors priced the impact of U.S. President Donald Trump’s trade policies on the global economy and fuel demand. Exxon had a net debt-to-capital of 7%. Kim Fustier of HSBC's European Oil and Gas Research said that Exxon was the only integrated company to not have increased its net debt in the third quarter. Chevron's oil and gas production in the first quarter of the year was the same as the previous one, due to a combination of growth in Kazakhstan and Permian and a loss from the sale assets. In an attempt to streamline the business and reduce costs by up to $3 billion, Chevron announced earlier this year that it would be laying off up to 20 percent of its employees. Chevron wants to get into the Guyana game by acquiring Hess, one of Exxon’s minor partners in the project. Exxon has been in arbitration for that deal and claims the right of refusal over Hess stake in the project. Exxon bought $4.8 billion worth of shares in the first quarter. This puts it on track to reach its annual goal of $20 billion. Chevron announced that it would reduce its buybacks from $3.9 billion to $2 billion-$3.5 billion during the current quarter. This is a reduction of $3.9 billion made between January and march. Jake Behan is the head of capital market at Direxion, a financial products company. He said that Exxon was able to maintain its buybacks due to low production costs, while Chevron reduced theirs as oil prices fell. Shell impresses, BP disappoints In Europe, Shell’s first-quarter results exceeded analyst expectations. The company announced that it would buy $3.5 billion of shares in the next three month, marking the 14th quarter in a row of a program worth at least $3 billion. BP's profit fell by 48% to $1.4 billion, missing earnings expectations. It also reduced its share buyback from $1.8 billion a quarter to $750 millions a quarterly. Biraj Borkhataria is an analyst with RBC Capital Markets. He said that after the disappointing results BP may miss consensus expectations by 20% for the second quarter earnings. He wrote: "The combination (of a weaker free cash flow), higher leverage and patchy implementation leaves us more conservative on the name in comparison to peers." After a failed effort to aggressively move towards a low-carbon business model, the British oil major has shifted its strategy back to oil and gas. BP underperformed before the recession, which made it a possible takeover target. Shell CEO Wael Sawan stated on Friday that he would prefer to buy more shares of his own company than bid for BP. Shell's investment budget for the year was between $20 billion to $22 billion, while BP announced that it would cut its spending by $500,000,000, to a budget of $14.5 billion. BP has also said it may sell more assets this year, upping its forecast for sales to between $3 and $4 billion from $3 billion. Reporting by Sheila Dang, Houston; Shadia Nasralla, London; editing by Rod Nickel
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The US jobs report and signs of an easing in trade tensions have led to a rise in world stocks.
Wall Street and European shares rallied, and U.S. Treasury Yields surged Friday as investors' risk appetite was boosted by a positive employment report and indications that China is willing to negotiate tariffs. The three major U.S. indexes all advanced by more than 1% in the session. Financials, transports, and microchips, which are sensitive to the economy, outperformed the overall market. The three indexes all rose this week. The S&P 500 has posted nine consecutive sessions of gains. This is its longest winning streak since over twenty years. According to the Labor Department's report, the U.S. economy created more jobs last month than was expected, and wage inflation was below consensus. This prompted a rise in U.S. Treasury benchmark yields. Paul Nolte is a senior wealth advisor and market strategist with Murphy & Sylvest, located in Elmhurst. He said, "The jobs data was very positive; it shows that the economy's doing well." "There is still discussion about the impact of tariffs but, so far, this data hasn't shown up in many of the numbers." China's Commerce Ministry announced that Beijing was evaluating Washington’s offer to have talks about President Donald Trump’s crippling tariffs. This could signal a possible de-escalation in the market-shaking trade war. Jed Ellerbroek is a portfolio manager with Argent Capital Management, St. Louis. He said that both China and the U.S. were taking small but consistent steps towards negotiation and reconciliation. "It seems the spiraling-out-of-control phase ended." Ellerbroek said that "the market doesn't believe the current tariffs will last very long." The latest quarterly earnings report shows that the lack of clarity surrounding U.S. China trade duties contributed to a marked decline in long-term expectations for U.S. companies. Apple and Amazon.com released their quarterly earnings on Thursday night with disappointing estimates, including Apple’s estimated $900,000,000 in tariff costs. These reports have taken some of the wind out of the sails for the Magnificent 7 group of megacap stocks related to artificial intelligence, which enjoyed a recovery this week. General Motors has warned that earnings will be hit by $4-5 billion dollars and American Airlines has withdrawn its profit forecasts. The Dow Jones Industrial Average rose by 564.47, or 1.39 %, to 41.317.33, the S&P 500 gained 82.49, or 1.47 %, to 5,686.63 while the Nasdaq Composite climbed 266.99, or 1.51% to 17,977.73. European shares surged as investors regained confidence after a busy week of earnings, fueled by renewed hopes for Sino-U.S. Trade Negotiations and strong employment data. The MSCI index of global stocks rose by 13.23 points or 1.58% to 848.38. The pan-European STOXX 600 Index rose 1.67% while Europe's broad FTSEurofirst 300 Index rose 36.55 point, or 1.75%. Emerging market stocks increased by 23.83 points or 2.14% to 1,135.80. MSCI's broadest Asia-Pacific share index outside Japan closed up by 2.44% to 595.08 while Japan's Nikkei gained 378.39 or 1.04% to 36,830.69. Treasury yields increased as investors reduced their bets that the Federal Reserve would cut rates in June due to strong employment numbers. The yield on the benchmark U.S. 10 year notes increased 7.7 basis points from 4.231% to 4.308% late Thursday. The 30-year bond rate rose by 5.2 basis points, from 4.737% to 4.7889% late Thursday. The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Federal Reserve (Fed), rose by 12.5 basis points, to 3.826% from 3.701%, late Thursday. Dollar dropped in wake of positive U.S. employment report. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and others) fell by 0.14%, while the euro rose 0.12%, reaching $1.1304. The dollar fell 0.3% against the Japanese yen to 144.99. Crude continued to fall as investors positioned ahead of a decision expected by OPEC+ boosting output. U.S. crude dropped 1.60%, settling at $58.29 a barrel. Brent, however, settled at $61.29 a barrel, down by 1.35%. The gold price reversed gains earlier and was headed for a loss of a week amid eased trade tensions. Spot gold dropped 0.24% to $3232.60 per ounce. U.S. Gold Futures increased 0.47% to an ounce of $3,225.00.
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Goldman Sachs predicts a 410,000-bpd increase in OPEC+ supply for June
Goldman Sachs said on Friday that it expects OPEC+ will announce a second consecutive supply increase for June on July 1 due to the modest compliance of Kazakhstan, lower than expected OECD inventory levels, and Saudi Arabia’s ability to deal with lower oil prices. The Wall Street bank expects the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to announce a 410,000-barrel-per-day (bpd) increase in supply for June in its meeting on Saturday, from its prior estimate of 140,000 bpd, according to a note. Three sources said on Friday that the OPEC+ summit was moved from Monday to Saturday. Three sources told Friday that the expected increase will be three times higher than the December level to begin unwinding of cuts. Goldman Sachs' previous OPEC forecast was based on a substantial increase in compliance with the production cuts. However, Kazakhstan's compliance is only modest, according to it. Moreover, inventories for the Organisation for Economic Co-operation and Development countries (OECD) for April fell short of the bank's expectation by 28 million barrels because supply missed in Venezuela and U.S. shale. Goldman Sachs economists also found that Saudi Arabia can survive lower oil prices. Goldman Sachs stated that "this week's decline in oil prices and the increases in implied volatility, put skew and put spread suggest that the central expectation of the market has also converged towards a 410,000 bpd rise." Brent crude settled at $61.29 a bar on Friday, and West Texas Intermediate crude (WTI) futures at $58.29 a bar. This is the biggest weekly loss since the end March. Goldman's oil price forecast is unchanged. It expects Brent to average $63 per barrel and WTI to average $55 for the rest of 2025. Brent will be $58 in 2026 and WTI will be $55. The bank predicted that a global slowdown, or a complete reversal in the voluntary OPEC+ reductions of 2.2 million bpd could push Brent into the 40s by 2026 and even below $40 under an extreme scenario. (Reporting and editing by Marguerita Chy in Bengaluru)
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US EPA to cut staff back to 1980s levels and dissolve the research office
As part of an overhaul of the U.S. Environmental Protection Agency, the agency announced on Friday plans to cut its budget by $300,000,000 in fiscal year 2026. It also plans to reduce its staffing levels to those of 1980s and dissolve its Research and Development office. The reorganization will consolidate key offices and reflect President Donald Trump's executive order to reduce regulatory red tape, promote energy development, and cut down on bureaucracy. In a press release, EPA Administrator Lee Zeldin stated that the reorganization would bring needed efficiencies in incorporating science into rulemaking and sharply focus on our work to provide the cleanest air and water possible for our communities. The agency has said that its staffing levels will drop to a level seen last in the 1980s when Ronald Reagan was president of the United States and the EPA was headed by an administrator critical of the agency. In 1984, there were just over 11,400 EPA staffers. By 2024, that number will rise to 15,100. After weeks of speculation, Zeldin announced the cancellation of EPA grant money worth billions. Major changes to the agency's structure include shifting scientific research from the Office of Research and Development to different program offices, such as a new office of applied science that would align research with the politically-appointed administrator's policy priorities. Researchers at ORD had warned against dissolving ORD's research unit, arguing that it would undermine the scientific independence of the organization. It said that the EPA would also raise issues such as cybersecurity, emergency response and water reuse and conservancy. (Reporting and editing by Leslie Adler, Ni Williams, and Valerie Volcovici)
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HSBC Asset Management global head of Sustainability to depart
HSBC announced on Friday that the top executive in sustainable finance at its asset management division will be leaving the company. This is the latest departure from the bank during a period of restructuring under the new chief executive. Erin Leonard's departure as global head of sustainability for HSBC Asset management follows that of Celine Herweijer who left the bank at the end last year. The bank is reassessing its environmental, social, and governance policies under Georges Elhedery, CEO. Both before and after Donald Trump's election, there has been a growing pushback in the United States against ESG. HSBC is one of the mid-sized banks that focuses on international corporations. Many financial firms have reduced their commitments to climate change and other issues. Leonard was the head of HSBC Asset Management’s Sustainability Office. This office, created in 2021, is responsible for managing the sustainable investment efforts and strategy. She was also in charge of the company's diversity, equity and inclusivity initiatives. A spokesperson for asset manager stated that the responsibilities of this office had been spread across the other businesses in the asset management division. Other sustainability-related initiatives have been consolidated under the Responsible Investment team led by Cathrine de Coninck-Lopez, the spokesperson added. Leonard was also a member of Asset Manager's Management Committee, but it is unclear if she was removed from this position. HSBC refused to comment. Elhedery, who assumed the role of CEO six months ago, has made a significant impact on the bank by cutting the number of senior managers in the bank and restructuring the operating divisions. By the end of 2026, the bank will have saved $1.5 billion annually. This is equivalent to 8% of its total staff costs. HSBC angered campaigners by abandoning its goal of reaching zero emissions in its entire business by 2030 due to the slow pace of changes in the real-economy. The bank said to shareholders that it is committed to becoming a zero-emission bank by 2050. It has also begun to review its emission targets linked to loans and associated policies. The bank also hired new executives including Danny Alexander, a former UK politician to lead a new unit focusing on infrastructure financing and project finance related to the low carbon transition. HSBC Asset Management will manage $179 billion by 2024 in ESG and Sustainable Investment Strategies. It is a member of the Net Zero Asset Management initiative, a U.N. backed group of asset management companies working to align investment to net zero. (Reporting and editing by Virginia Furness, Simon Jessop, and Nia William)
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Stocks rise on positive jobs data and signs of trade tensions easing
Wall Street and European shares surged on Friday, while the dollar fell as investors' risk appetite was boosted by a positive U.S. Employment Report and signs that China is willing to negotiate tariffs. The three main U.S. indexes rose sharply, with the more sensitive sectors of financials, transportations, and microchips performing better than the overall market. The three indices are all headed to weekly gains. According to the Labor Department's report, the U.S. economy created more jobs last month than was expected, and wage inflation was below consensus. This prompted a rise in U.S. Treasury benchmark yields. Paul Nolte is a senior wealth advisor and market strategist with Murphy & Sylvest, located in Elmhurst. He said, "The jobs data was very positive; it shows that the economy's doing well." "There is still discussion about the impact of tariffs but, so far, this data hasn't shown up in many of the numbers." China's Commerce Ministry announced that Beijing was evaluating Washington’s offer to have talks about President Donald Trump’s crippling tariffs. This could signal a possible de-escalation in the market-shaking trade war. Jed Ellerbroek is a portfolio manager with Argent Capital Management, St. Louis. He said that both China and the U.S. were taking small but consistent steps towards negotiation and reconciliation. "It seems the spiraling-out-of-control phase ended." Ellerbroek said that "the market doesn't believe the current tariffs will last very long." The latest quarterly earnings report shows that the lack of clarity surrounding U.S. China trade duties contributed to a marked decline in long-term expectations for U.S. companies. Apple and Amazon.com released their quarterly earnings on Thursday night with disappointing estimates, including Apple’s estimated $900,000,000 in tariff costs. These reports have taken some of the wind out of the sails for the Magnificent 7 group of megacap stocks related to artificial intelligence, which enjoyed a recovery this week. General Motors has warned that earnings will be hit by $4-5 billion dollars and American Airlines has withdrawn its profit forecasts. The Dow Jones Industrial Average climbed 586.76, or 1.4%, to 41.339.67. The S&P 500 rose by 93.31, or 1.57%, to 5.697.77. And the Nasdaq Composite jumped 322.93, or 1.8%, to 18.035.16. European shares surged as investors regained confidence after a busy week of earnings, fueled by renewed hopes for Sino-U.S. Trade Negotiations and strong employment data. The MSCI index of global stocks rose by 14.11 points or 1.69% to 849.31. The pan-European STOXX 600 Index rose 1.67% while Europe's broad FTSEurofirst 300 Index rose 36.55 point, or 1.75%. Emerging market stocks increased by 23.31 points or 2.10% to 1,135.28. MSCI's broadest Asia-Pacific share index outside Japan closed up by 2.4% to 594.90. Japan's Nikkei gained 378.39, or 1.04% to 36,830.69. Treasury yields increased as investors reduced their bets that the Federal Reserve would cut rates in June due to strong employment numbers. Treasuries were also under pressure because of fears that Japan would use its massive U.S. Debt holdings to negotiate in trade negotiations. The yield on the benchmark U.S. 10 year notes increased 9.7 basis points from 4.231% to 4.328% late Thursday. The 30-year bond rate rose by 6.5 basis points, from 4.737% to 4.8021% late Thursday. The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Federal Reserve (Fed), rose by 14.1 basis points, to 3.843% from 3.701%, late Thursday. Dollar dropped in wake of positive U.S. employment report. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and others) fell by 0.08%, reaching 100.06; the euro rose by 0.04%, at $1.1295. The dollar fell 0.25% against the Japanese yen to 145.06. Crude continued to fall as investors positioned ahead of a decision expected by OPEC+ boosting output. U.S. crude dropped 1.60%, settling at $58.29 a barrel. Brent, however, settled at $61.29 a barrel, down by 1.35%. The gold price reversed gains earlier and was headed for a loss of a week amid eased trade tensions. Spot gold dropped 0.49% to $3.224.39 per ounce. U.S. Gold Futures increased 0.47% to an ounce of $3,225.00.
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Canada's wildfire season starts with fires in northeast British Columbia
Wildfire season in Canada has started. Officials from the province of British Columbia, located at the west-most tip of the country, have warned that the risk of fires will increase over the next few weeks. B.C. B.C. The warning stated that unseasonably dry, warm and windy weather conditions can create a high fire risk. The fire that was out of control on Friday spanned 56 ha (138 acres), and it was located just north of Fort St. John, in the northeastern part of the province. The fire forced some residents to evacuate the city on Thursday night, but they were allowed to return to their homes on Friday. As the fire moved northeastward away from the town, it was able to continue to burn. As of Friday morning, the second fire was out of control and covered 185 hectares (457) acres. It was located in northeastern part of the province to the southeast of Dawson Creek. The B.C. The B.C. The wildfire season of 2024 in Canada was one the most destructive ever recorded, thanks to a fire that destroyed a tourist village in the Canadian Rockies. (Reporting and Editing by Bill Berkrot.)
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EnQuest pulls out of Serica contract as market volatility hinders agreement on terms
The companies announced on Friday that North Sea oil producer EnQuest would not make an offering for UK-based Serica Energy as they could not reach an agreement on favorable terms in time due to market volatility. At 1623 GMT, EnQuest shares fell about 5% to 13.14 pence. Serica shares rose 0.3% to 127 pence. Serica announced in March that it was in discussions with EnQuest regarding a potential deal. The termination comes amid an economic wave of uncertainty caused by the sweeping tariffs that U.S. president Donald Trump has imposed around the world. Energy prices have been dragged down by investors' fears of a global slowdown due to recessionary concerns. OPEC+ has also increased oil production, increasing global supplies and further reducing prices. Trade tensions have ripple effects that go beyond energy. Bloomberg News, citing sources familiar with the situation, reported that Bunge Global, a U.S. commodity trader, is unable to complete its planned $34 billion merger of Viterra, which is owned by Glencore, due to the escalating U.S. China trade friction. Trade tensions have also reduced the time available for initial public offering. Among those companies who have put their IPOs on hold recently are Swedish fintech company Klarna and San Francisco-based Chime. EnQuest made its decision hours before a Friday deadline for the proposal. The proposal would have given Serica shareholders the majority stake in the combined firm and returned capital to the investors. Serica stated that it is confident in its "standalone capability to generate significant cash flows and deliver shareholder value as well as highly competitive shareholder returns."
Chevron exceeds Wall Street profit expectations as refinery recovers from the previous quarter
Chevron reported earnings for the first quarter that were in line with Wall Street expectations, after seeing a turnaround of its refining division from a loss at the end of last year.
Eimear Bonner, the company's chief finance officer, stated that Chevron could repurchase shares this year between $11.5 billion and 13 billion dollars, which is within its guidance range of $10 billion to 20 billion.
According to LSEG, the second largest U.S. oil company posted earnings adjusted of $3.8 billion for the three-month period ended March 31. This is $2.18 per common share and matches analyst expectations.
The profits from refining, oil and gas production and refining were lower than a year earlier, but they improved significantly from the previous quarter when Chevron reported its first loss for four years in the downstream operations.
Chevron, along with other oil producers, has been dealing with falling crude prices ever since U.S. president Donald Trump announced tariffs on April 2 that were expected to slow global economic growth.
Lower crude oil prices have led to questions over whether producers can meet their dividend and share repurchase goals - an important part of Big Oil’s strategy to attract investors - without cutting capital expenditure budgets.
Chevron reported that it paid out $3 billion in dividends during the third quarter and purchased $3.9 billion worth of shares.
The company expects to buy back between $2 billion and $3 billion of shares in the second quarter. Bonner, in an interview, said that if Chevron were to continue this trend, it could end up with between $11.5 and $13 billion of repurchases by 2025.
She said, "We are still repurchasing a significant portion of our shares each year. On top of that, our dividend is growing faster than any of our competitors."
Chevron's total global oil production was 3.35 million barrels equivalent per day. This is the same as last year.
In January, the company completed a major expansion of the Tengiz Oilfield in Kazakhstan and increased production in the Permian Basin, the largest U.S. oilfield by 12%. These gains were offset with a loss in production due to asset sales. In April, Chevron began production at its Ballymore project located in the U.S. Gulf of Mexico.
Tengiz operations have been a focus of attention as Kazakhstan has consistently exceeded OPEC+ oil output quotas. Bonner stated that the company operates unrestricted.
Chevron's second quarter shipments to Venezuela will be affected by an order from the Trump administration that ended operations in Venezuela during the first quarter.
The earnings from oil and natural gas production fell to $3.76 billion from $5.24 in the previous quarter.
Chevron's refinery business made $325 million in the first quarter of 2018, down from $783 millions a year earlier. This is a significant turnaround from the last quarter, when the company reported its first loss since 2020 as the post-pandemic surge of fuel demand faded.
(source: Reuters)