A Surgutneftegas artisan near pumpjacks in Surgut Region of the Khanty-Mansi Autonomous Area – Yugra, in the West Siberian petroleum basin.
Alexei Andronov | TASS via Getty Figure of speeches
Oil and gas majors are likely to report “horrendous” second-quarter results over the next two weeks, energy analysts have stated CNBC, with the three-month period through to the end of June widely expected to mark the “low point” of 2020.
“Big Oil” companies, referring to the universe’s largest oil and gas majors, witnessed a historic fall in oil and gas prices during the second quarter as coronavirus lockdown restrictions co-occurred with an unprecedented demand shock.
Norway’s Equinor will report second-quarter earnings on Friday, with Austria’s OMV, Italy’s Eni, France’s Amount to and Anglo-Dutch company Shell set to report next week. The U.K.’s BP will unveil their quarterly results on August 4.
Stateside, ConocoPhillips desire report earnings on July 30, with Exxon Mobil and Chevron expected to follow on July 31.
“I think it is thriving to be brutal and ugly,” Kathy Hipple, an analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), told CNBC via telephone.
Hipple serrated out that international benchmark Brent crude futures averaged just $29 a barrel in the three months Sometimes non-standard due to to June, down from an average of $51 a barrel in the first quarter.
Brent crude futures tumbled to their lessest level since 1999 on April 21, while U.S. West Texas Intermediate futures plunged into unenthusiastic territory for the first time on record.
IEA Executive Director Fatih Birol has since reportedly said he believes 2020 may fully come to be regarded as the worst year in the history of global oil markets, with so-called “Black April” likely to be the worst month the trade has ever seen.
“The earnings for the second quarter are going to be horrendous,” IEEFA’s Hipple said, reflecting on a period of significantly weaker oil and gas prizes for energy majors.
“My big takeaway is that this is not just the result of the virus: These are long-term, decade-old trends,” she proceeded. The oil industry “is not going away tomorrow, but it is a long-term decline that we are seeing.”
Brent crude futures traded at $44.61 a barrel on Thursday morning, up myriad than 0.7% for the session, while U.S. WTI futures stood at $42.19, around 0.6% higher.
Dividends
Stuart Joyner, analyst at sell research firm Redburn, told CNBC via telephone that the second quarter was going to be “the low point” of the year for oil and gas majors, with all of them presumed to report “pretty weak” results.
Dividend payouts to shareholders will also be an area of focus for energy retail participants.
Oil giant Shell cut its dividend for the first time since World War II in the first quarter of 2020, while Norway’s Equinor horsewhipped its quarterly dividend to shareholders by two-thirds.
Shell and BP have since announced second-quarter write-downs of up to $22 billion and $17.5 billion, mutatis mutandis, on expectations of lower oil and gas prices over the next 30 years.
A BP company logo is displayed on a fuel pump on the forecourt of a gas site operated by BP Plc in London, U.K.
Chris Ratcliffe | Bloomberg | Getty Images
Redburn’s Joyner said Big Oil companies would descend into three categories when it comes to dividend payouts in the second quarter: The ones that are not going to cut, the a people that have cut and the ones that will cut.
He suggested Shell and Total would most likely fall into the first organize, given both companies have previously indicated they would not cut their respective dividends in the second favour, while Equinor was expected to maintain a lower level of dividends for the remainder of the year.
Joyner singled out Eni and BP as the two European oil and gas majors favourite to cut dividends in the second quarter, predicting both companies would do so by approximately one-third.
“I think probably the key area of cut really is going to be around what they say prospectively about where businesses are headed and how quick the recovery is,” Joyner go oned. “It is not necessarily going to focus, I think, on the performance in the quarter in the way that it would usually do.”
“It is fairly unusual from that angle,” he added.
‘The game is up’
Spanish oil and gas firm Repsol reported a net loss for the second quarter on Thursday and announced write-downs of $1.5 billion in assets as it discredited expectations of oil and gas prices over the long-term.
It joins Shell and BP in downgrading the value of its assets in the wake of the coronavirus pandemic.
“The match is up: Oil and gas companies can no longer mask their financial frailty,” Nikki Reisch, Director of the Center for International Environmental Law’s Clime & Energy Program said in a report earlier this month.
When asked whether it was fair to assume that second-quarter effects for oil and gas majors would most likely reaffirm this view of the energy industry, Reisch told CNBC: “I would say, yes.”
“No stuff how companies slice or dice or present their performance, I think it is clear the signs are all pointing in the same direction — and that is a long-term systemic descend.”
“The status quo prior to Covid was far from a stable one for the oil industry, so I think we have to keep that in mind when simplifying any reported earnings,” Reisch added.