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Big Oil Earnings: Exxon, Chevron, Conocophillips In Focus

 January 29, 2013 04:47 PM
 


(By Mani) Oil majors Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX) and ConocoPhillips (NYSE: COP) are expected to report their fourth-quarter earnings this week.

The companies are reporting results amid increasing domestic oil and gas production due to new technology being deployed in U.S. shale fields, and the continuing Brent/WTI spread. Though, higher production could be a good news for consumers, it may lead to lower prices and hurt margins.

ConocoPhillips

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The first oil heavyweight to report would be ConocoPhillips, which is set to announce earnings on Jan.30. Houston, Texas-based company is expected to earn $1.42 a share, according to analysts polled by Thomson Reuters. The consensus view implies a 30 percent drop from $2.02 a share earned in the same quarter last year.

Quarterly revenues are expected to drop 79 percent to $13.31 billion from $62.39 billion recorded in the year-ago quarter due to the spin-off of Phillips 66 (NYSE: PSX) in May. Phillips 66 is the largest independent refining and marketing company in the US by market capitalization, with more than 2.2 million barrels per day (mmbd) of refining capacity.

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Earnings of ConocoPhillips, which would record a $400 million charge in its fourth-quarter results related to its Kazakhstan stake sale, have surpassed Street view thrice in the past four quarters, while the analyst estimates have fallen by 3 cents in the past 90 days. 

ConocoPhillips is divesting assets to unlock value for shareholders, have disposed off assets totaling about $7 billion, and is plans complete $8 billion to $10 billion in disposition by the end of 2013.

For the third quarter, it reported earnings of $1.80 billion or $1.46 per share, lower than $2.6 billion or $1.91 per share in the prior-year quarter. Excluding items, adjusted earnings for the quarter were 1.77 billion or $1.44 per share. Total revenues and other income for the quarter decreased to $15.09 billion from $16.70 billion in the same quarter last year. 

Exxon Mobil 

Exxon Mobil, a Dow component, is estimated to report 1.5 percent growth in earnings to $2 when it reports quarterly results on Feb.1. However, revenues for the fourth quarter are projected to fall 3.7 percent to $117.15 billion.

During the past three months, the average estimate has moved down from $2.04 while the company's earnings have topped consensus view twice in the past four quarters.  Ten analysts have increased their earnings forecast in the past 30 days while three have cut their views for the quarter.

In the third quarter, Exxon's earnings were $9.57 billion or $2.09 per share, down from $10.33 billion or $2.13 per share in the year-ago period.  Quarterly total revenues and other income declined 8 percent to $115.71 billion from $125.33 billion in the prior-year quarter.

Since Exxon gets much of its revenues from refining than from exploration, margins could hurt its bottom line. Furthermore, liquids production fell 6 percent in the production, and the upstream would be a focus area for investors.

Chevron

Chevron, the No.2 integrated oil and gas company is expected to report its fourth-quarter financial results on Feb.1. 

Earnings are expected to rise 17 percent to $3.03 a share, with revenue projected to grow 14.4 percent to $68.64 billion. In the same quarter last year, Chevron earned $2.58 a share on revenue of $59.98 billion. 

Chevron's third-quarter net income was $5.25 billion or $2.69 per share, down from $7.83 billion or $3.92 per share in the prior-year period. Sales and other operating revenues for the quarter were $55.66 billion, down 9 percent from $61.26 billion last year.

Earnings of Chevron have missed estimates thrice in the past four quarters, and the consensus view has dropped from $3.11 during the past 90 days. However, during the past one month, nine analysts have raised their fourth-quarter earnings estimate on Chevron.

California-based Chevron says it expects fourth quarter earnings to be "notably higher" than the third quarter, helped mainly by gains on an asset transaction as well as on increased oil and gas output. The oil giant expects both upstream and downstream business to perform well and post higher earnings, despite a sharp decline in industry refining margins.

Meanwhile, investors will look for updates over Exxon's latest behemoth drilling project of the coast of Newfoundland, Canada. The Hebron oil field is a $14 billion investment project of which Exxon and Chevron are the two largest partners with 36 and 27 percent, respectively. 

The project might single-handedly resolve both companies upstream woes as the project is expected to recover more than 700 million barrels of oil and will be capable of churning out 150,000 barrels of oil per day from the gravity-based platform.

iStock believes investors should favor the stocks of companies with large market value, strong balance sheets, positive free cash flow and above-market dividend yields. Among others, ConocoPhillips and Chevron have the highest dividend yield.

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