The energy sector is poised for a higher start supported by strength in the crude complex and in the major market indices. U.S. stocks futures gained as positive forecasts from Apple and Amazon indicated resilience in mega-cap companies in the face of weaker consumer spending, with hopes of a less aggressive monetary policy boosting sentiment.
The two largest U.S. oil companies, Exxon Mobil and Chevron Corp, posted record revenue, bolstered by surging crude oil and natural gas prices and following similar results for European giants a day earlier. The U.S. pair, along with UK-based Shell and France’s TotalEnergies, combined to earn nearly $51 billion in the most recent quarter, almost double what the group brought in for the year-ago period. All four have ramped up share buybacks in recent months, capitalizing on high margins derived from selling oil and gas. Exxon outpaced its rivals with second-quarter net income of $17.9 billion, several billion dollars ahead of its previous record reached in 2012, which was aided by asset sales in Japan.
WTI and Brent crude oil are up in early trading as attention turned to next week’s OPEC+ meeting and expectations that it will dash U.S. hopes for a supply boost. OPEC+ sources said the group will consider keeping oil output unchanged for September, with two OPEC+ sources saying a modest increase would be discussed. A weaker dollar and stronger equities also lent support to oil prices, although the rally in oil could stall as recession fears and COVID flare-ups in China slow demand and counter supply risks from sanctions on Russia and OPEC+ output constraints.
Natural gas futures rose in early trading as preliminary estimates for storage data week-ending today has a build of +25 Bcf to +35 Bcf vs the 5-year average of +33 Bcf.
BY SECTOR:
US INTEGRATEDS
Chevron reported earnings of $11.6 billion ($5.95 per share – diluted) for second quarter 2022, compared with $3.1 billion ($1.60 per share – diluted) in second quarter 2021. Included in the current quarter were charges associated with an early contract termination of $600 million, pension settlement costs of $11 million, and a gain on asset sales of $200 million. Foreign currency effects increased earnings by $668 million. Adjusted earnings of $11.4 billion ($5.82 per share – diluted) in second quarter 2022 compares to adjusted earnings of $3.3 billion ($1.71 per share – diluted) in second quarter 2021. Sales and other operating revenues in second quarter 2022 were $65 billion, compared to $36 billion in the year-ago period.
Exxon Mobil announced estimated second-quarter 2022 earnings of $17.9 billion, or $4.21 per share assuming dilution. Second-quarter results included a favorable identified item of nearly $300 million associated with the sale of the Barnett Shale Upstream assets. Capital and exploration expenditures were $4.6 billion in the second quarter and $9.5 billion for the first half of 2022.
INTERNATIONAL INTEGRATEDS
Eni’s Board of Directors, chaired by Lucia Calvosa, approved the unaudited consolidated results for the second quarter and first half 2022. Group adjusted EBIT in the second quarter 2022 was €5.84 billion, up 13% q-o-q and more than doubling y-o-y driven by the favorable commodity price environment, strong refining margins and the focus on cost management and business operating performance. Group adjusted net profit in the second quarter was €3.81 billion (€7.08 billion in the first half 2022), an improvement of €2.9 billion y-o-y (€5.9 billion increase in the first half) reflecting this strong EBIT result and further helped by the performance of our equity-accounted entities and a lower tax rate (quarter on quarter tax rate was essentially in line). Based on the authorization granted by the Shareholders Meeting on May 11, 2022, the Board of Directors approved a new share purchase program to be executed through April 2023, providing for a minimum outlay of €1.1 billion and a possible upside up to €2.5 billion depending on trends in the scenario. The 2022 buy-back program commenced at the end of May and through July 22, 2022, 29.4 million shares have been purchased for a cash outlay of €355 million. Following the Board’s revised outlook for the Brent crude oil prices, now expected at 105 $/bbl average for the full year 2022 and reflecting the effects of the stronger US dollar plus broader strength in the Group’s cash flows the buy-back commitment has been raised by €1.3 billion to €2.4 billion.
Eni announced yet another significant gas discovery of 1-1.5 trillion cubic feet (TCF) of raw gas in place, in a deeper zone, in its first exploration well drilled in Offshore Block 2 Abu Dhabi, United Arab Emirates (UAE).
Eni believes it will be able to completely replace Russian gas imports by 2025 as uncertainty over Moscow’s energy supplies to Europe forces countries to seek alternative supplies.
The Petroleum Safety Authority Norway (PSA) has given Equinor consent for temporary use of Snorre gas import pipeline.
The Petroleum Safety Authority Norway has given Equinor consent for exploration drilling in block 31/1 in the North Sea.
Petrobras smashed second quarter profit and margin estimates, boosted by divestments and higher margins in its natural gas business, the company said. In a securities filing, Petroleo Brasileiro SA, as the state-run oil firm is formally known, reported a net income of 54.33 billion reais ($10.5 billion), well above the Refinitiv consensus estimate of 38 billion reais.
Petrobras has approved a record dividend payout of 87.8 billion reais ($17 billion), Brazil’s state-run oil company said on Thursday, a move that will boost the government’s coffers heading into a tense election. In a securities filing, Petroleo Brasileiro SA, as the firm is formally known, said its board approved a dividend payout of 6.732 reais per ordinary and preferential share. A first installment of 3.366 reais will be paid on Aug. 1 and the remainder is scheduled to be paid on Sept. 20, the company said.
Santos Ltd gave no timeframe on Friday for deciding whether to go ahead with the $3 billion Pikka oil project in Alaska after its partner, Spain’s Repsol SA, said it expects a final decision this quarter and first oil in 2026.
Petrobras confirmed the discovery of natural gas accumulation in the Uchuva-1 exploratory well, drilled in deep waters of Colombia, 32 kilometers off the coast and 76 kilometers from the city of Santa Marta, in a water depth of approximately 830 meters.
Shell said it will set up a joint venture with China’s Shenergy Group to build a hydrogen refuelling network in Shanghai, the first of its kind for the European energy major in Asia.
The partnership between TotalEnergies and ADNOC has been further strengthened following the signing by ADNOC Distribution of an agreement to acquire a 50% stake in TotalEnergies Marketing Egypt LLC for a consideration of approximately $200 million. This new transaction follows the signing of the strategic partnership agreement signed by TotalEnergies and ADNOC on the occasion of the state visit in Paris of His Highness Sheikh, Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates.
CANADIAN INTEGRATEDS
Imperial Oil reported estimated net income in the second quarter of $2,409 million, up from $1,173 million in the first quarter of 2022, driven by continued strong market conditions and improved operating performance. Cash flow from operating activities was $2,682 million up from $1,914 million in the first quarter of 2022.
Imperial Oil declared a quarterly dividend of 34 cents per share on the outstanding common shares of the company, payable on October 1, 2022, to shareholders of record at the close of business on September 2, 2022.
U.S. E&PS
Continental Resources reported net income of $1.21 billion, or $3.35 per diluted share, for the quarter ended June 30, 2022. In second quarter 2022, typically excluded items in aggregate represented $42.8 million, or $0.12 per diluted share, of Continental’s reported net income. Adjusted net income for second quarter 2022 was $1.25 billion, or $3.47 per diluted share (non-GAAP). Net cash provided by operating activities for second quarter 2022 was $1.74 billion, and EBITDAX was $2.20 billion (non-GAAP). The Company announced that its Board of Directors has declared a quarterly dividend of $0.28 per share on the Company’s outstanding common stock, payable on August 22, 2022 to stockholders of record on August 8, 2022. This equates to an approximately 1.7% dividend yield.
Enerplus announced that it has entered into a definitive agreement to sell certain Canadian assets located in Alberta to Journey Energy for total consideration of CDN$140 million (US$109 million), prior to closing adjustments. Under the terms of the agreement, the total consideration comprises cash of CDN$81 million, 3.0 million common shares in Journey valued at CDN$14 million based on its last five trading days volume weighted average share price, and a CDN$45 million monthly amortizing, interest-bearing loan which Enerplus will provide to Journey that is secured by certain of the Assets and which must be repaid in full by October 31, 2024.
CANADIAN E&PS
MEG Energy reported its second quarter 2022 operational and financial results. Funds flow from operating activities were $412 million ( $1.31 per share) and adjusted funds flow of $478 million ( $1.52 per share). Operating expenses net of power revenue was $12.97 per barrel, including non‐energy operating costs of $5.65 per barrel. Power revenue offset energy operating costs by 30%, resulting in energy operating costs net of power revenue of $7.32 per barrel. MEG initiated its share buyback program in the quarter and to date has returned $139 million of capital to shareholders through the repurchase for cancellation of approximately 7.24 million MEG common shares.
OILFIELD SERVICES
Balchem reported second quarter net earnings of $29.8 million for 2022, compared to net earnings of $22.7 million for the second quarter 2021, adjusted net earnings of $34.4 million, compared to $30.4 million in the prior year quarter, and adjusted EBITDA of $56.5 million, compared to $50.1 million in the prior year quarter.
Minerals Technologies reported diluted earnings per share of $1.50, excluding special items, for the second quarter ended July 3, 2022, compared with $1.29 in the prior year. Reported diluted earnings per share were $1.36 compared with $1.23 in the prior year. Worldwide net sales were $557.0 million, up 7 percent sequentially and 22 percent above the prior year on continued execution of strategic growth initiatives, strong demand across all segments, and continued pricing actions. On a constant currency basis, sales grew 27 percent, as foreign exchange had an unfavorable impact on sales of $21 million.
U.S. Silica Holdings announced net income of $22.9 million, or $0.29 per diluted share, for the second quarter ended June 30, 2022. The second quarter results were negatively impacted by $2.4 million pre-tax, or $0.03 per diluted share after-tax, of charges primarily related to merger and acquisition related expense and facility closure costs, resulting in adjusted EPS (a non-GAAP measure) of $0.32 per diluted share.
DRILLERS
Dril-Quip reported operational and financial results for the second quarter of 2022. Consolidated revenue for the second quarter of 2022 was $94.0 million, up $10.8 million from the first quarter of 2022 and up $13.2 million compared to the second quarter of 2021. For the second quarter of 2022, the Company reported a net loss of $5.6 million, or a $0.16 loss per share. Adjusted EBITDA totaled $9.3 million for the second quarter of 2022 compared to $3.2 million for the first quarter 2022, representing incremental margins of 57% quarter-over-quarter. Adjusted EBITDA for the second quarter of 2022 was up $6.7 million compared to the second quarter of 2021.
REFINERS
Phillips 66 announced second-quarter 2022 earnings of $3.2 billion, compared with earnings of $582 million in the first quarter of 2022. Excluding special items of $118 million, the company had adjusted earnings of $3.3 billion in the second quarter, compared with first-quarter adjusted earnings of $595 million.
MLPS & PIPELINES
Enbridge reported second quarter 2022 financial results, reaffirmed its 2022 financial outlook and announced $3.6 billion of newly secured growth projects this quarter. Second quarter GAAP earnings were $0.5 billion or $0.22 per common share, compared with GAAP earnings of $1.4 billion or $0.69 per common share in 2021. Adjusted earnings were $1.4 billion or $0.67 per common share, compared with $1.4 billion or $0.67 per common share in 2021.
Pacific Energy and Enbridge announced an agreement to jointly invest in the construction and operation of the Woodfibre LNG project. Woodfibre LNG is a 2.1 million-tonne-per-year liquefied natural gas (LNG) export facility with 250,000M3 of floating storage capacity being built near Squamish, B.C. The project is underpinned by two long-term offtake agreements with BP Gas Marketing Limited for 15 years representing 70% of the capacity, with additional commitments in development for up to 90%. Woodfibre LNG announced in April that it had issued Notice to Proceed to global engineering and construction company McDermott International and that the project is expected to be in service in 2027.
Magellan Midstream Partners LP on Thursday reported declining volumes in the last quarter on the Longhorn and Bridgetex pipelines that carry crude from the Permian Basin to Houston as shippers likely moved barrels to the international market, while refined product volumes rose on pandemic demand recovery.
NuStar Energy L.P. announced that its Board of Directors has declared a second quarter 2022 common unit distribution of $0.40 per unit. The second quarter common unit distribution will be paid on August 12, 2022 to holders of record as of August 8, 2022.
Shell Midstream Partners, L.P. reported net income attributable to the Partnership of $148 million for the second quarter of 2022, which equated to $0.33 per diluted common limited partner unit. Shell Midstream Partners also generated adjusted earnings before interest, income taxes, depreciation and amortization attributable to the Partnership of $191 million.
CIBC downgraded TC Energy to Neutral from Outperformer.
MARKET COMMENTARY
Wall Street futures were higher, as positive forecasts from Apple and Amazon indicated resilience in mega-cap companies in the face of weaker consumer spending, with hopes of a less aggressive monetary policy boosting sentiment. European shares climbed as a host of strong earnings from corporate Europe overshadowed fears of a global recession. Japan’s Nikkei reversed its course to close slightly lower as Denso outlook soured sentiment. The U.S. dollar struggled broadly against its rivals in the wake of worrying U.S. economic data, while gold prices rose. Oil gained as attention turned to next week’s OPEC+ meeting and expectations that it will dash U.S. hopes for a supply boost. Scheduled on the economic calendar are consumer spending data, PCE price index data and University of Michigan’s final consumer sentiment index reading due for release.
Nasdaq Advisory Services Energy Team is part of Nasdaq’s Advisory Services – the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner.
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