Oil & Gas Stock Roundup: Chevron, Phillips 66 Q4 Earnings, News From Linde & Shell

It was a week when oil prices were little changed but natural gas settled higher.

On the news front, energy companies Chevron CVX, Phillips 66 PSX and Valero Energy VLO reported December-quarter earnings. Meanwhile, industrial gas supplier Linde plc LIN raised its quarterly dividend and oil major Royal Dutch Shell RDS.A agreed to buy electric vehicle (EV) charging firm Ubitricity.

Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures edged down a miniscule 0.1% to close at $52.20 per barrel, while natural gas prices rose around 4.4% in the week to end at $2.564 per million Btu (MMBtu).

The crude benchmark was largely unchanged week over week as government data showing a large decrease in stockpiles was offset by coronavirus-induced fresh travel curbs in the U.K., China and New Zealand that inflicted another blow to fuel consumption.

Meanwhile, natural gas finished up after a cold spell across the northern part of the country led to a spike in the commodity’s demand for heating.

Recap of the Week’s Most-Important Stories

1.  Energy major Chevron reported adjusted fourth-quarter loss per share of one cent. The Zacks Consensus Estimate was of a profit of 8 cents. Meanwhile, the company earned $1.49 per share in the year-ago period. The underperformance reflects sharply lower oil and natural gas price realizations, plus a decline in refined products margins.

The company recorded $2.3 billion in cash flow from operations, down from $5.6 billion a year ago. The plunge in cash flow could be attributed to lower price realizations in the upstream business. The company's cash flow for the full-year 2020 was $10.6 billion, down 61% from 2019.

Chevron spent $3.2 billion in capital and exploratory expenditures during the quarter, down significantly from the year-ago period’s $6 billion. More than 78% of the total outlays pertained to upstream projects. In 2020, capital spending amounted to $13.5 billion, down 35.7% year over year. (Chevron Slips to Loss in Q4 Despite Cost Cuts, Output Up)

2.  Downstream operator Phillips 66 reported fourth-quarter 2020 adjusted loss per share of $1.16, wider than the Zacks Consensus Estimate of a loss of $1.09. The company reported adjusted earnings of $1.54 per share in the year-ago quarter. The wider-than-expected loss was due to sinking demand of refined products caused by the coronavirus pandemic.

Total costs and expenses for the fourth quarter significantly decreased to $17,459 million from $28,546 million in the year-ago period. The cost of purchased crude oil and products, operating expenses, and SG&A costs declined from the year-ago levels. Notably, impairment charges significantly increased on a year-over-year basis for the fourth quarter.

For the reported quarter, Phillips 66 generated $639 million of cash from operations. Its capital expenditures and investments totaled $506 million. It paid dividends of $393 million in the reported quarter. (Phillips 66 Q4 Earnings Miss on Massive Refining Loss)

3.  Another refining major Valero Energy reported fourth-quarter 2020 loss of $1.06 per share, narrower than the Zacks Consensus Estimate of a loss of $1.48. The Zacks Rank #3 (Hold) company’s outperformance could be attributed to lower cost of sales.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operating loss at the key Refining segment was reported at $377 million against a profit of $1,419 million in the year-ago quarter. Lower refinery throughput volumes amid the coronavirus pandemic affected the segment. For the quarter, refining throughput volumes were 2,550 thousand barrels per day (Mbpd), significantly down from the prior-year quarter’s 3,018 Mbpd.

The company expects capital investment for this year to be $2 billion. Of the total, 60% will likely be used for business sustaining purposes and the rest will be utilized for growth projects. Notably, around 50% of its growth capital will be allotted for the renewable diesel business’ expansion. (Valero Q4 Earnings Beat, Renewable Fuel Demand to Rise)

4.  Leading industrial gas producer and distributor Linde recently announced that its board of directors has approved an increase in quarterly dividend. The new dividend of $1.06 per share reflects a 10% increase from the previous figure.

Moreover, it announced a new stock repurchase program of $5 billion. This buyback program is expected to replace its existing $6-billion program, which is scheduled to expire on Feb 1, 2021. Such activities are part of Linde’s long-term goal of boosting shareholder value. Importantly, using the latest share buyback program, the company will likely be able to repurchase up to 15% of outstanding shares. It can use the funds through Jul 31, 2023.

The company’s efforts to enhance shareholder value are supported by profitable operations. Significant demand for industrial gases like hydrogen, used for refining of raw crude, and oxygen, needed in steel production, will continue to fetch Linde incremental cash flows. Markedly, it has signed a memorandum of understanding with Snam last December to develop hydrogen projects and associated infrastructure in Europe. (Linde Ups Dividend, Announces New $5B Buyback Program)

5.  Royal Dutch Shell recently announced that it will purchase the entire stake in Ubitricity, one of the largest EV charger providers in the UK in terms of individual devices in operation.

Ubitricity was founded in 2008 in Berlin. It operates the largest public EV charging network in the United Kingdom with more than 2,700 charge points. This accounts for 13% of the country’s public charge points. The company also functions in various other European countries like Germany and France and set up nearly 1,500 private charge points for fleet customers across Europe.

With this deal, Shell further strengthens its position in the rapidly-increasing on-street EV charging market, offering critical competencies and helping the company better its overall EV charging offer. This also involves nearly 1,000 ultra-fast and fast-charging points at around 430 Shell retail spots. Further, it includes worldwide access to more than 185,000 third-party EV charging points at a number of public places like forecourts, motorway service stations and destinations.(Shell Seals a Deal to Buy EV Charging Firm Ubitricity)

Price Performance

The following table shows the price movement of some the major oil and gas players over past week and during the last six months.

Company    Last Week    Last 6 Months

XOM               -5.5%             +6.6%
CVX                -7.1%            +6.1%
COP               -6.2%            +10%
OXY                -6.7%            +33.1%
SLB                -9%               +24.8%
RIG                +22.6%         +57.4%
VLO               -5.1%             +3.7%
MPC              -5.7%             +17.2%

The Energy Select Sector SPDR — a popular way to track energy companies — was down 6.5% last week. The worst performer was integrated energy major Chevron whose stock slumped 7.1%.

But for the longer term, over six months, the sector tracker is up 12.9%. Offshore driller Transocean RIG was the major gainer during the period, experiencing a 57.4% price appreciation.

What’s Next in the Energy World?

As global oil consumption gradually ticks up from the depths of coronavirus, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that comes out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is also closely followed. There will also be 2020 Q4 earnings, with a number of S&P 500 components coming up with quarterly results. Finally, news related to coronavirus vaccination and additional U.S. stimulus will be of utmost importance.

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