EARNINGS PREVIEW: US Oil Majors' 3Q Net Seen Up On Oil Prices

U.S. oil majors are expected to post a 56% surge in third-quarter profits compared with the same quarter a year earlier thanks to higher oil prices and improved refining margins.

But the companies' earnings may be in line with or slightly lower than they were in the second quarter, after fears of a double-dip recession sent oil prices lower than they were in the second quarter. The third quarter could mark the entrance of a period of moderation for Big Oil profits.

"Earnings will be above where they were last year, but sequentially results are going to be down," said Phil Weiss, an analyst with Argus Research.

The expected boost in year-over-year profits would mostly be due to the jump in Brent crude oil prices compared with the third quarter of 2010. The European benchmark--which oil majors use to market their massive international oil and liquefied-natural-gas production--rose 46% from the third quarter of 2010 to $112.09 a barrel.

Brent, however, was down 4% in the third quarter from the second quarter. West Texas Intermediate light, sweet crude oil in the U.S. traded in the third quarter at an average of $89.76 a barrel, up 18% from the third quarter of 2010 but down 12% from the second quarter.

The wide price difference between WTI and Brent, which in the third quarter exceeded $18 a barrel, is likely to continue benefiting U.S. oil majors' refining arms. They have large refineries in the interior of the country that have access to discounted U.S. crude, and they can sell the refined products at prices that reference Brent.


ConocoPhillips - reports Oct. 26

Wall Street Expectations: Analysts polled by Thomson Financial, on average, expect the Houston company to report earnings of $2.15 a share for the third quarter on revenue of $57 billion. A year earlier, ConocoPhillips earned $1.50 a share on revenue of $47.21 billion.

Key Issues: ConocoPhillips last week named the new chief executives of the two companies that will emerge from its split next year. Analysts are likely to ask for details on the appointments of Ryan Lance and Greg Garland as heads of the production and refining companies, respectively. Their announcement surprised some analysts who had seen other candidates as frontrunners.

Analysts also will want an update on the company's asset sales, including the chances that its Trainer refinery in Pennsylvania could be sold soon. The company said in July that it will shut down the facility if it doesn't find buyers in six months. The company is expected to put more low-income refineries for sale and significantly reduce its refining capacity.

ExxonMobil - reports Oct. 27

Wall Street Expectations: Analysts, on average, expect the Irving, Texas, company to report earnings of $2.13 a share for the third quarter on revenue of $113.56 billion. A year earlier, ExxonMobil earned $1.44 a share on revenue of $95.3 billion.

Key Issues: In September, the world's largest publicly traded oil company said it acquired acreage in Ohio's Utica Shale, marking its first foray into a field that is thought to hold vast amounts of crude oil. Exxon, however, didn't disclose the size of its position or the price it is paying per acre. Analysts are likely to ask for such details and for an estimate on the region's resource potential.

Exxon said last week it is on track to spend a record $37 billion in capital projects this year, or 9% more than previously expected. Analysts are likely to ask whether the company is planning to spend more or less than that next year. They would also want to know details on the tax framework for the recently announced deal between Exxon and Russia's Rosneft to explore for oil in the Arctic.

Chevron - reports Oct. 28

Wall Street Expectations: Wall Street expects the San Ramon, Calif., company to report earnings of $3.41 a share on revenue of $69.25 billion, up from earnings of $1.87 a share a year earlier on revenue of $48.55 billion.

Key Issues: Tuesday, Chevron said its third-quarter earnings would be in line with the second quarter as higher refining results are likely to offset lower profits from its exploration-and-production arm. Chevron reported earnings of $7.73 billion in the second quarter of 2011 and $3.77 billion in the third quarter of 2010.

Analysts could query the company on whether it is expecting to increase spending next year over this year's budget of $26 billion. Analysts also will want an update on the company's operations in the Marcellus Shale where the oil giant has been actively drilling after it acquired Atlas Energy early this year. They also might ask whether Chevron is likely to make further acquisitions in the region or perhaps in Ohio's Utica Shale, where several energy companies--including rival ExxonMobil--recently bought leases.

(The Thomson Reuters estimate and year-earlier earnings may not be comparable due to one-time items and other adjustments.)

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Brent Crude Oil : $51.46/BBL 0.61%
Light Crude Oil : $50.52/BBL 0.64%
Natural Gas : $2.83/MMBtu 5.35%
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