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Exxon Mobil Corp. and Chevron Corp. face Wall Street scrutiny this week amid heightened negative sentiment for the sector and plunging oil prices.
Integrated energy companies Exxon XOM, -2.21% and Chevron CVX, -1.45% are expected to report fourth-quarter earnings before the bell on Friday. Exxon has scheduled a conference call with analysts for 9:30 a.m. Eastern, while Chevron’s call is set for 11 a.m. Eastern.
The first wave of energy companies’ reporting was mixed, with oil-field-services companies Schlumberger Ltd. SLB, -5.26% last week beating analyst expectations and Halliburton Co HAL, -5.76% swinging to a GAAP quarterly loss for the first time in two years and beating adjusted-profit expectations.
Oil-field-services companies steered investors “toward back half of this year (vs. first half) to see the long-awaited acceleration of international/offshore oil-field activity growth,” analysts at Tudor Pickering Holt said in a note.
On Monday, energy stocks were among the worst performers in the U.S. markets pullback, with shares of Exxon poised to end at their lowest since October 2010 and extending a losing streak to its straight ninth session.
The losses came as oil prices got derailed by fears the coronavirus out of Wuhan, China, would weigh on global economic growth and weaken demand for oil.
The pullbacks in oil and natural-gas prices have led to a drop around 5% in fourth-quarter consensus for oil majors broadly, analysts at JPMorgan said in a note Monday.
The market is generally less pessimistic about 2020, but given the more recent drops in oil and natural gas prices “we would not be surprised if consensus expectations for the majors started to reverse (and turn negative) with the prints,” they said.
Here’s what to expect:
Earnings: Analysts polled by FactSet expect Exxon to report GAAP earnings of 75 cents a share, which would compare with GAAP earnings of $1.41 a share in the fourth quarter of 2018. Adjusted profit is seen at 46 cents a share, which would compare with $1.29 a share in the year-ago period.
Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, is expecting earnings of 58 cents a share for Exxon.
For Chevron, the FactSet-surveyed analysts expect GAAP earnings of $1.51 a share and adjusted earnings of $1.44 a share, which would compare with GAAP and adjusted earnings of $1.95 a share in the fourth quarter of 2018. At Estimize, earnings are expected to come in at $1.56 a share.
Revenue: The analysts surveyed by FactSet expect sales of $64.4 billion for Exxon. That would be down from $71.9 billion a year ago. Estimize sees revenue of $68.7 billion for the company.
For Chevron, revenue is seen at $38.9 billion, which would be down from $42.3 billion in the year-ago quarter. Estimize sees fourth-quarter revenue at $38.7 billion.
Stock movement: Exxon shares have lost about 9% in the past 12 months, and Chevron shares have lost 2.3%. That compares with an advance of 18% for the Dow Jones Industrial Average DJIA, -1.39%. Exxon and Chevron are Dow components.
What else to expect: Chevron in December said it was taking a $10 billion to $11 billion charge in its fourth-quarter results, partly related to soured natural-gas bets in North America. The company said then it was evaluating “strategic alternatives” for some natural-gas assets, including a potential sale.
Expect investors to want more clarity about these alternatives. Bears are concerned weak U.S. gas and liquefied natural gas prices could weigh in the near term, analysts at Goldman Sachs said in a note this week.
In the previous quarterly update, Chevron focused on its Tengiz oil project in Kazakhstan, a project that has gone through price overruns.
“We believe it is too early to provide an incremental update around Kazakhstan, but still expect this to be a factor that is heavily discussed on the call,” the Goldman Sachs analysts said in the note. “While we are constructive on the (free cash flow) power of (Chevron), investors are concerned around the inventory life of the business and whether the company is ‘underinvesting,’” they said.
An update on Tengiz will be important as ”investors are looking for further assurances that last quarter’s ~25% budget raise was the final increase,” the JPMorgan analysts said. The analysts also expect details around Chevron’s Gulf of Mexico projects, and how the offshore area fits “into (Chevron’s) growth strategy beyond Tengiz,” they said.
At Exxon, concerns have centered around margins for its gas, chemicals, and refined products. The Goldman analysts expect the call to focus on Exxon’s plan to improve its “downstream” earnings, and the status of its ongoing asset sale program.
The analysts at JPMorgan said they expect “continued challenges” for Exxon’s chemical business and hold a “tempered view” on upside potential for downstream this year.
An update about Guyana projects and an initial look at 2020 capital expenditure plan would also be important, even as Exxon is likely to save any key details on capex and production outlook for its March analyst day.
“Finally, following (Chevron’s) big asset write-down in December, we think that (Exxon) may have to follow suit, a negative for optics. Bottom line, we find little to be excited about near-term with the challenging macro backdrop across all of (Exxon’s) businesses,” they said.
