In the words of a wildly popular weekly US television series: “BP, you are in danger. Hess…you’re safe!”
Due to current low oil price realizations, BP's consolidated cash flows in 1Q fell to about US$1.9 billion, a significant fall from a year ago, when the company reported about $8.2 billion for 1Q 2014.
Specifically, operating cash flows (even after adjusting for Macondo payouts of $690 million and changes in working capital) were not sufficient to cover the company's capital expenditures and dividend distributions, according to a recent report by Seeking Alpha. “In fact, BP effectively paid the majority of its dividend this quarter from borrowed funds,” reports the firm.
However, like other major international oil companies, BP’s less-than-stellar financial result in the upstream side was, in part, mitigated by its favorable performance on the downstream side. “The strong profit on the refining side is not at all surprising, as downstream margins typically act as a natural dynamic hedge during quarters when oil prices experience sharp moves,” reports Seeking Alpha.
Meanwhile, Hess Corp. faired a bit better. The company posted a quarterly loss that beat Wall Street's expectations, and its recent cost cuts helped offset low crude oil prices. The company continues to produce from its prolific Bakken wells in North Dakota, which represent about 33% of its daily production.
"Our Bakken team continues to drive costs lower," said chief executive John Hess in a public statement. He noted that the company has seen a 9% drop in the cost of each well there, mostly due to efficient operations and renegotiated contracts with vendors. Hess plans to spend $4.4 billion in 2015, and plans to generate further savings by asking Halliburton and other product and service providers to reduce prices.
Also, ConocoPhillips is reporting lower quarterly profits due to the decline of crude oil prices. The company’s profit in 1Q fell to a mere $272 million, compared to $2.1 billion in 1Q 2014. The company reports that its average price per boe was $36.96, down from $71.21 in the same period in 2014.
Shell is safe, and holding its own in 1Q 2015. Shell’s 1Q earnings were $3.2 billion, compared with $7.3 billion during 1Q 2014, as the company’s downstream segment earned a 68% increase in 1Q earnings, about $2.6 billion. Shell continues to report that its proposed takeover of BG Group will make it stronger by increasing its growth in deepwater operations and in liquefied natural gas (LNG) markets.
Elsewhere, ExxonMobil Corp.'s 1Q profit dropped less than the analysts’ expectations due to favorable operations at its refining facilities. The 50% drop in crude prices slashed the costs of its feedstock for the refineries. (In fact, many companies in the refining sector are actively exploiting storage availability for arbitrage, which has contributed to the record storage levels in the US) ExxonMobil earned a 1Q profit of $4.9 billion, which is down 46% from $9.1 billion in 1Q 2014, but is still much better than most. Also, the company claims that it has driven down costs by a whopping 20% by demanding discounts from already-squeezed oilfield services firms.
Photo courtesy of Hess Corp.
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