Big Oil Looks for Bumper Profits -- WSJ
October 23 2017 - 2:02AM
Dow Jones News
By Christopher M. Matthews
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 23, 2017).
When some of the world's largest energy companies report
earnings next week, it will provide a glimpse into whether they are
improving profitability as oil prices continue to hover around $50
a barrel.
Wall Street will be reading the tea leaves in earnings reports
from Exxon Mobil Corp., Chevron Corp. Halliburton Co. and others,
looking not just for the companies' bottom lines but also for
whether oil and gas production may be easing, particularly in the
U.S.
The world's biggest oil companies are expected to see big gains
in profits as they continue to reorient their businesses around
lower-cost projects that yield returns faster. The five largest
Western companies are expected to post total profits of almost $13
billion for the three months ended in September, an increase of
more than 30% compared with the same period in 2016, according to
analyst estimates on FactSet.
Exxon, Chevron and Total SA, which report Friday, are seen
lifting their net incomes by more than a third. The following week,
Royal Dutch Shell PLC could see the biggest gains, with profits
that could more than double compared with the third quarter of last
year, while BP PLC earnings are expected to be roughly in line with
last year, according to analyst estimates.
Two of the world's largest oil-field services companies,
Schlumberger Ltd. and Baker Hughes, a GE company, provided an early
look at the industry's quarterly prospects with their earnings this
past week and painted a picture of slowing activity in U.S. shale
basins.
That's a potential sign that American oil and gas producers are
listening to investors' calls to operate within their means, and no
longer pursuing growth at the expense of profitability. If a
slowdown in U.S. production sticks, it could also help relieve
oversupplied global oil markets and drive the price per barrel up
even further.
The U.S. land drilling rig count continued to fall Friday as the
number of active U.S. oil rigs dropped to their lowest level since
early June as another seven rigs were parked, putting the total at
736. The weekly tally by Baker Hughes has only increased once in
the past eight weeks.
Even the Permian Basin of Texas and New Mexico, where more than
half of all the active U.S. oil rigs are located, saw a decline in
the latest week, with its oil rigs dropping by six to 378.
That's noteworthy because the Permian is the lowest-cost shale
region, where some have said profits can be made even when prices
are just $30 or $40 per barrel.
A drilling slowdown is obviously not good for everyone. But it
is a positive in some investors' eyes, signaling producers are
focused on pumping oil from existing wells instead of drilling new
ones in pursuit of growth.
Oil-field service companies, which help producers with drilling
and hydraulic fracturing, are often a bellwether for the overall
state of the oil-and-gas industry, providing insights into their
customers' plans.
Schlumberger returned to a profit in the third quarter,
reporting this week that it brought in $545 million in income,
compared with $74 million in losses the previous quarter. The
oil-field services giant said activity was led once again by U.S.
land oil production.
But as producers enter capital-expenditure planning seasons,
Schlumberger CEO Paal Kibsgaard said investment by U.S. energy and
production companies seems to be moderating. Mr. Kibsgaard said
Friday that while he expects continued growth in the U.S., he
believes the pace will slow.
Baker Hughes, which General Electric Co. bought in July, said
its losses narrowed 17% in the third quarter to $122 million, from
$147 million in losses in the previous quarter, as it works to
merge the oil-field services businesses of the two companies.
Lorenzo Simonelli, CEO of the newly combined company, agreed
with his counterpart at Schlumberger, saying he saw a
"deceleration" in U.S. drilling activity in the last quarter.
--Bradley Olson contributed to this article.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
(END) Dow Jones Newswires
October 23, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Halliburton (NYSE:HAL.WD)
Historical Stock Chart
From Aug 2024 to Sep 2024
Halliburton (NYSE:HAL.WD)
Historical Stock Chart
From Sep 2023 to Sep 2024