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U.S. oil prices cracked $80 per barrel for the first time since mid-April on Thursday, a day before Chevron (CVX) and ExxonMobil (XOM) report full second-quarter financials. Analysts expect a profit dip due to lower oil and natural gas prices in 2023. XOM and CVX were mixed Thursday.
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West Texas Intermediate (WTI) oil futures rose more than 1%, topping $80 per barrel — a three-month high, Thursday before pulling back below $80. U.S. oil prices have rallied around 10% in July on prospects of tighter global supply, decreasing views for a U.S. recession and stronger demand in China. Chinese authorities recently pledged to step up stimulus support, bolstering the oil demand outlook for the world’s top crude importer.
“The combination of weaker supply growth, cyclical tailwinds and seasonal demand were expected to reverse the bearish trend that has been in place since last fall,” Third Bridge analyst Peter McNally wrote Tuesday on crude prices.
“The biggest wild card for prices is still China where demand has underwhelmed forecasts,” he added.
Meanwhile, U.S. natural gas futures traded down more than 2% around $2.63 per million British thermal units Thursday. This follows a 7% gain last week driven by expectations of heightened demand for air conditioning amid hotter-than-usual weather forecasts until at least August 9.
CVX fell 1% to 159.69 early Thursday during market trade. The Dow Jones component is down around 12% in 2023. Meanwhile, ExxonMobil added 0.3% to 105.42 on Thursday.
Shell (SHEL), which reported mixed Q2 financials Thursday, shed 2.9% to 60.80. BP (BP) lost more than 1% to 36.67 with earnings due Tuesday.
CVX Surprises The Market
Chevron on Sunday released earlier-than-expected partial second-quarter numbers.
Chevron topped Wall Street profit estimates, even as earnings dropped nearly 50% to $3.08 per share. Analysts expected earnings of $2.91. Chevron will release full second-quarter results on Friday, when ExxonMobil also reports.
Last year, as the U.S. economy bounced from Covid pandemic retreat to inflation-driven growth, Russia invaded Ukraine in February. The combination sent oil, gasoline and natural gas prices soaring. This resulted in Chevron, Exxon Mobil and other energy stocks leading the market for the year, with the companies racking up record profits.
Chevron Earnings Details
In addition to financial results, the U.S. oil major announced Sunday it would waive the mandatory retirement age of 65 for Chief Executive Officer Mike Wirth, 62, and that Chief Financial Offer Pierre Breber will retire next year.
Eimear Bonner, currently the vice president and chief technology officer at Chevron, will succeed Breber on March 1, 2024, the company said.
The energy giant added in its second-quarter performance highlights that production in the west Texas Permian Basin set a quarterly record. Chevron reported production totaled 772,000 barrels of oil equivalent per day and that Permian production is on track to meet full-year guidance.
Despite that performance, Chevron’s net oil equivalent production so far in 2023 is running flat vs. 2022, totaling 2.9 million barrels of oil equivalent per day.
Meanwhile, Chevron returned $7.2 billion to shareholders in Q2, with $2.8 billion in dividends and $4.4 billion in stock purchases.
In addition, the company expects its $6.3 billion deal to acquire PDC Energy (PDCE) to close in August.
In Q1, Chevron topped Wall Street estimates, even as revenue slipped compared to a year ago. Earnings gained 6% to $3.55 per share in the first quarter. Sales dropped 6% to $50.79 billion. Higher margins on refined product sales drove the earning beat, the company said, partially offset by lower oil prices and rising production costs.
Warren Buffett and Berkshire Hathaway (BRKB) sold around $6 billion worth of Chevron stock in the first quarter, according to Berkshire’s Q1 financial report. Buffett’s outfit reported reducing CVX holdings to $21.6 billion as of March 31.
Warren Buffett began buying the Dow Jones stock in 2020. Prior to Buffett’s decision to sell, Berkshire Hathaway amassed a stake totaling 167 million CVX shares, worth around $29 billion.
ExxonMobil Earnings On The Way
Estimates: Analysts see Exxon earnings slipping 50% to $2.03 per share with revenue decreasing 30% to $81.8 billion.
Results: Check early Friday.
ExxonMobil stock is currently in consolidation and sitting around 15% below a 119.92 buy point, according to MarketSmith analysis.
Morgan Stanley retains a “preference” for ExxonMobil over Chevron stock, analyst Devin McDermott wrote on Tuesday.
CVX offers strong cash flow and low-risk investments, the note said. But XOM provides more “diversification in its growth opportunities, including a lower reliance on shale and upside from cost cutting initiatives.”
In Q1, ExxonMobil earnings jumped 36% to $2.83 per share with revenue slipping 4% to $86.56 billion.
The company’s net production in the first quarter was 3.8 million oil-equivalent barrels per day up 4% from last year. Meanwhile, ExxonMobil’s upstream earnings totaled $6.5 billion in Q1, a 20% drop compared to the fourth-quarter 2022, but a 45% jump from last year.
Exxon reported the main drivers of this sequential quarterly drop was lower prices, with crude and natural gas revenue down 10% and 23%, respectively.
ExxonMobil stock has a 48 Composite Rating of 99. XOM shares have a 31 Relative Strength Rating and a 77 EPS Rating.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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