Oil & Gas Stock Roundup: Crude Slump Batters Exxon, Chevron Profits - Analyst Blog

It was a week where oil prices capped their worst monthly performance since 2008 and natural gas futures tumbled to a 3-week low. However, with earnings remaining front and center, the major headline came from Exxon Mobil Corp.XOM and Chevron Corp. 's CVX second quarter underperformance, where they succumbed to plunging oil prices to record their lowest earnings of the current decade.

Overall, it was a bearish week for the sector. West Texas Intermediate (WTI) crude futures dived 2.5% to close at $47.12 per barrel, while natural gas prices fell 2.1% to $2.72 per million Btu (MMBtu). (See the last 'Oil & Gas Stock Roundup' here: Weatherford Planning More Layoffs .)

Oil prices fell for the fifth straight week, the backdrop being another increase in the number of crude-directed rigs. An upwardly moving rig count has underlined concerns about an expansion in the commodity's global supply glut. The recent turn of events in Greece, Iran and China also created pressure. Finally, a stronger dollar has made the greenback-priced crude more valuable for investors holding foreign currency.

Natural gas fared poorly as well amid predictions of weak summer cooling demand with forecasts of mild weather across majority of the U.S. over the next two weeks.

Recap of the Week's Most Important Stories

1. Integrated supermajors Exxon Mobil Corp. and Chevron Corp. were hammered in the market after posting their worst quarterly profits in several years amid plunging oil and natural gas prices. However, they must be glad they did not let go their refineries, when many others did. Both the companies benefited from strong downstream performance. But even that was not enough to counter the faltering sales of their exploration and production businesses.

On a positive note though, the big firms have been able to grow production after spending billions in capital expenditures. Both the companies reported year-over-year increase in second quarter volumes.

With a rebound in commodity prices not visible anytime soon, the two American oil giants are looking to conserve cash with big spending cuts, while appeasing investors by maintaining their dividends.

2. Houston-based independent explorer and producer ConocoPhillipsCOP reported better-than-expected second quarter profit on improved volumes. Daily production from continuing operations averaged 1.595 million barrels of oil equivalent (MMBOE) in the quarter, up from 1.556 MMBOE in the year-ago quarter. However, revenue decreased from the year-ago level and also missed the Zacks Consensus Estimate by a considerable margin, plagued by sharply lower oil realizations. Average realized price for oil was $58.00 per barrel compared with $103.39 in the year-earlier quarter.

ConocoPhillips still expects to deliver 2-3% production growth in 2015. For the third quarter of 2015, production from continuing operations is expected at 1,510-1,550 MBOED, excluding Libya. (See More: ConocoPhillips Q2 Earnings Beat Estimates, Revenues Miss .)

3. Oil Refiner Valero Energy Corp.VLO came out with strong second quarter earnings on the back of higher refining throughput margins and lower refining operating expenses.

Throughput margins increased to $13.71 per barrel from the year-ago level of $9.84 per barrel. Moreover, total operating cost per barrel fell 4.2% year over year to $5.25 during the quarter, while refining operating expense per barrel was $3.66 compared with $3.90 in the year-ago quarter. (See More: Valero Energy Beats Q2 Earnings on Strong Refining Margins .)

4. Ohio-based independent oil refiner and marketer Marathon Petroleum Corp.MPC reported weaker-than-expected second quarter earnings, owing to lower refining margins. However, the bottom line improved from the year-ago period profit on the back of strong crack spreads, high utilization, together with conducive market conditions.

In a separate development, the fourth largest U.S. refiner announced a 28% increase in its quarterly dividend to 32 cents per share, or $1.28 per share annualized. The dividend is payable on Sep 10 to shareholders of record on Aug 19, 2015. Marathon Petroleum also said that its board approved an additional $2 billion for its stock buyback program over the next two years. (See More: Marathon Petroleum Q2 Earnings Miss, Revenues Beat .)

5. Downstream operator Phillips 66PSX posted adjusted second-quarter 2015 earnings of $1.83 per share, ahead of the Zacks Consensus Estimate of $1.81 and the year-ago earnings of $1.51 per share. Robust performance by the company's Refining and Marketing segments led to the outperformance.

During the quarter, Phillips 66 also increased its quarterly dividend by to 56 cents per share, or $2.24 per share annualized. The dividend is payable on Sep 1 to shareholders of record on Aug 17, 2015. (See More: Phillips 66 Beats Q2 Earnings, Revenue Estimates. )

Price Performance

The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.

Company Last Week Last 6 Months
XOM -5.35% -14.65%
CVX -7.32% -21.00%
COP -5.03% -24.53%
OXY +1.50% -14.16%
SLB -0.68% -2.92%
RIG -7.58% -29.95%
VLO +0.34% +19.10%
TSO +0.02% +13.64%

Over the course of last week, the best performer was U.S. energy explorer Occidental Petroleum Corp.OXY that added 1.5% to its stock price, while the biggest loser was offshore driller Transocean Ltd., which fell 7.6% during the period.

Over the last 6 months, downstream operator Valero Energy Corp. was the chief beneficiary on the bourses with its shares advancing 19.1%. On the other hand, Transocean was the laggard again, as it witnessed a 30% price decline over the same time frame.

What's Next in the Energy World?

Apart from the usual releases in this week - the U.S. government data on oil and natural gas - market participants will be closely tracking a series of crucial economic reports, including those on manufacturing, services, personal consumption, factory orders, trade and unemployment. In corporate news, the 2015 Q2 earnings remain the primary focus this week again, with some S&P 500 members coming out with quarterly results.

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CHEVRON CORP (CVX): Free Stock Analysis Report

VALERO ENERGY (VLO): Free Stock Analysis Report

CONOCOPHILLIPS (COP): Free Stock Analysis Report

OCCIDENTAL PET (OXY): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

PHILLIPS 66 (PSX): Free Stock Analysis Report

MARATHON PETROL (MPC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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