What to expect as Big Oil reports second-quarter earnings

Published

4 years ago

July 26, 2021

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An oil pump jack operates at the Inglewood Oil Field in Culver City, California, U.S., on Sunday, July 11, 2021.

Kyle Grillot | Bloomberg | Getty Images

LONDON — Oil and gas majors are likely to report bumper second-quarter earnings in the coming days, energy analysts have told CNBC, following a brutal 12 months by virtually every measure.

The expected upswing would build on a surprisingly strong showing in the first quarter and lend further support to the oil and gas industry’s efforts to pay down debt and reward investors.

“Big Oil” companies, referring to the world’s largest oil and gas majors, still face significant challenges and uncertainties, however.

These include the remarkable success of shareholder activism in recent months, a “tremendous degree” of ongoing investor skepticism and intensifying pressure to massively reduce fossil fuel use in order to meet the demands of the climate emergency.

“Europe’s integrated oil sector already enjoyed surprisingly strong earnings in 1Q, but 2Q is set to show further improvement as commodity prices took another step up,” analysts at Morgan Stanley said in a research note.

International benchmark Brent crude futures rose to an average of $69 a barrel in the second quarter, the Wall Street bank said, up from an average of $61 in the first three months of the year. The oil contract was last seen trading at around $73.57.

Oil companies that ignore climate in their earnings calls will be seen as laggards. Long-term investors will conclude they are financially risky.

Kathy Hipple

Finance professor at Bard College

Analysts at Morgan Stanley noted that energy major share prices continue to be anchored by their dividend distributions. Notwithstanding substantial increases to free cash flow forecasts, the bank said Big Oil dividend expectations remain “rather static.”

“The energy transition confronts investors with much uncertainty, and the sector’s capital allocation track record has been mixed at best over the last decade. Hence, investors are only valuing the cash flow paid to them, with little credit given for cash flow retained within companies,” they said.

“As the dividend outlook has not improved much, and dividend yields in aggregate are already low by historical standards, share prices have trailed the earnings outlook considerably.”

In Europe, Royal Dutch Shell and TotalEnergies will report second-quarter earnings on July 29, with BP scheduled to follow on Aug. 3. Stateside, ExxonMobil and Chevron are expected to publish their latest figures on July 30, while ConocoPhillips will report second-quarter earnings on Aug. 3.

Fuel prices on a sign at a BP gas station in Louisville, Kentucky, on Friday, Jan. 29, 2021.

Luke Sharrett | Bloomberg | Getty Images

Rene Santos, manager for North America supply at S&P Global Platts Analytics, told CNBC via email that he expects second-quarter earnings from U.S.-based energy companies to be “significantly higher” when compared to the same period in 2020.

This is “mainly due to much higher oil prices,” he added. “In addition, the majors, large and mid-cap companies have kept capital discipline and have continued to focus on paying down debt and increasing free cash flow instead of increasing activity [drilling and completion] despite higher oil prices.”

Santos said S&P Global Platts Analytics also foresee an increase in the reporting of ESG activity, noting that it “looks like pressure from environmental groups and fear of more regulations from the current administration is persuading many companies to do more to decrease emissions.”

Growing climate risk

The oil and gas industry was sent into a tailspin last year as the coronavirus pandemic coincided with a historic fuel demand shock, plunging commodity prices, unprecedented write-downs and tens of thousands of job cuts. The torrent of bad news prompted the head of the International Energy Agency to suggest it may come to represent the worst year in the history of oil markets.

Oil prices have since rebounded to multi-year highs and all three of the world’s main forecasting agencies — OPEC, the IEA and the U.S. Energy Information Administration — now expect a demand-led recovery to pick up speed in the second half of 2021.

Clark Williams-Derry, energy finance analyst at IEEFA, a non-profit organization, said he expects oil and gas companies to try to claim a clean bill of health after a bumper second quarter. “That’s the mantra that we will hear,” he told CNBC via telephone.

However, while energy majors will likely have had the opportunity to pay down some debt after generating a significant chunk of cash from their operations, Williams-Derry said that this hides the fact that these companies have not invested much in future production.

Members of the environmental group MilieuDefensie celebrate the verdict of the Dutch environmental organisation’s case against Royal Dutch Shell Plc, outside the Palace of Justice courthouse in The Hague, Netherlands, on Wednesday, May 26, 2021. Shell was ordered by a Dutch court to slash its emissions harder and faster than planned, dealing a blow to the oil giant that could have far reaching consequences for the rest of the global fossil fuel industry.

Peter Boer | Bloomberg | Getty Images

“What I think the market is starting to signal is that it kind of likes when the oil companies shrink and aren’t going all out into new production but they are using the cash that their operations are generating to pay down debt and reward investors.”

Longer term, Williams-Derry warned there’s a “tremendous degree” of investor skepticism about the business models of oil and gas firms, citing the deepening climate crisis and the urgent need to pivot away from fossil fuels.

“We saw earlier in the year signs of a sea change in investor thinking about, frankly, the legal status of some of the supermajors,” he said, referring to a series of landmark courtroom and boardroom defeats for the likes of Royal Dutch Shell, ExxonMobil and Chevron.

“So, even if you are riding high for a quarter or two when prices are high, the reality is still that stock prices are way below the market as a whole and there’s just not the investor enthusiasm for the old business model that I think these companies probably expected to see,” he said.

Energy transition

Kathy Hipple, finance professor at Bard College in New York, told CNBC via email that she believes two key themes are likely to emerge this earnings season: Addressing investor concerns around climate risk and the outlining of new business models to survive a pivot toward renewables.

“Investors are future-oriented and will look past a short-term pop in earnings compared to last year’s dismal second-quarter results,” Hipple said. “They want to see concrete business strategies that acknowledge the energy transition that is gathering speed.”

She argued it was important to note that these earnings will be announced “against a backdrop of climate disasters around the globe,” from extreme heat in the Pacific Northwest to flooding in Europe and China.

“Oil companies that ignore climate in their earnings calls will be seen as laggards. Long-term investors will conclude they are financially risky,” Hipple said.

Environment

400 kW DC fast charging On The Run arrives in Canada – and it’s FREE!

Published

8 hours ago

April 18, 2025

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400 kW DC fast charging On The Run arrives in Canada – and it's FREE!

British Columbia got its first 400 kW DC fast charger last week at Canadian C-store chain On The Run, but that’s not the good part. As part of a limited time offer, these chargers are FREE!

The Canadian convenience store chain just took the wraps off its new, ABB-developed, 400 kW chargers earlier this month, but they’re already planning to bring the ultra-fast 400 kW dispensers to at least four more locations in BC this spring, and have them online just in time for the summer road trip season – something On The Run hopes its customers will appreciate.

“The A400 charger delivers an enhanced customer experience, with reliability and performance from a 32-inch screen to higher power charging sessions and power sharing,” reads the company’s official announcement, via LinkedIn. “Download the Journie Rewards app to start the charge – free for a limited time.”

On The Run’s new 400 kW ABB DC fast chargers are compatible with CCS and CHAdeMO plugs, and can accommodate Tesla and other NACS-equipped vehicles with an adapter. That said, the company seems to imply that Tesla drivers in particular will have a maximum charging speed of “just” 50 kW, which feel hilarious (given the current state of affairs between Tesla and the Canadian government), but probably isn’t.

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In addition to the ABB A400 400 kW units shown here, On The Run locations also employ the ABB Terra 184 dispensers rated at 180 kW. On The Run plans similar deployments at the four BC locations mentioned above, as well as two more each in Quebec and Ontario slated to go live towards the end of this year.

Electrek’s Take

[embedded content]

Tesla’s controversial CEO Elon Musk once mocked 350 kW charging speed as being “for a child’s toy,” despite the fact that, nearly nine years later, his own cars and Superchargers can barely make it to 325 kW while others have sailed right on past. I made fun of that fact on the Quick Charge episode shown, above – and, while I do think it’s funny and relevant, the much more relevant piece of news here is that companies like BP Pulse, Revel, and Wallbox are actively deploying 400 kW solutions, today (while others hit the same mark as far back as 2017).

It’s just a fact: Tesla has fallen way behind.

SOURCE | IMAGES: On The Run, via Electric Autonomy.

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Environment

Terawatt opens its first electric charging truck stop in California

Published

10 hours ago

April 17, 2025

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Terawatt opens its first electric charging truck stop in California

Terawatt charging truck stop — Photo: Terawatt

Terawatt Infrastructure‘s first medium- and heavy-duty electric charging truck stop in California is now online, in Rancho Dominguez.

Located 12 miles north of the ports of Long Beach and Los Angeles, the private Rancho Dominguez site, which is shared among multiple fleets, will support electric trucking fleet operations in and out of the largest container ports in the US.

First customers include Dreaded Trucking, Hight Logistics, PepsiCo, Quick Container Drayage, Southern Counties Express, Tradelink Transport, and WestCoast Trucking & Warehousing.

Terawatt’s electric charging truck stop features 20 pull-through and bobtail DC fast charging stalls with a capacity of 7 megawatts (MW), enabling charging for up to 125 trucks per day using a simple reservations system. Terawatt’s site features a proprietary charge management system, in-house technicians, 24/7 customer service, and onsite parts management.

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“This launch underscores growing collaboration between enterprises, shippers, carriers, and charging infrastructure providers to advance sustainable technologies across logistics and transportation operations, especially in the medium and heavy-duty sectors,” said Neha Palmer, CEO and cofounder of Terawatt. Palmer added that the company will bring another charging site online in Rialto, California, in June.

Terawatt joined some of the world’s largest shippers and carriers in September 2024 to launch the I-10 Consortium heavy-duty EV operations pilot, the “first-ever US over-the-road electrified corridor.” Terawatt is providing charging infrastructure, including software, operations, and maintenance support at six of its owned charging hubs along the I-10 corridor.

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Environment

Trump admin halts $5 billion NY offshore wind project mid-build

Published

13 hours ago

April 17, 2025

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In its most aggressive attack against offshore wind yet, the Trump administration halted the $5 billion Empire Wind 1, already under construction off New York’s coast.

Norwegian developer Equinor announced yesterday that it received notice from the Bureau of Ocean Energy Management (BOEM) ordering Empire Wind 1 to halt all activities on the outer continental shelf until BOEM has completed its review. Interior Secretary Doug Burgum posted this tweet yesterday:

.@Interior, in consultation with @HowardLutnick, is directing @BOEM to immediately halt all construction activities on the Empire Wind Project until further review of information that suggests the Biden administration rushed through its approval without sufficient analysis.

— Secretary Doug Burgum (@SecretaryBurgum) April 16, 2025

Burgum gave no indication of what insufficiencies there were in the approval process for the fully permitted offshore wind project, despite Trump’s recent declaration of a national energy emergency that speeds up permitting processes.

The commercial lease for the 810-megawatt (MW) Empire Wind 1’s federal offshore wind area was signed in March 2017 during the first Trump administration. It was approved by the Biden administration in November 2023 and began construction in 2024.

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The project is being developed under contract with the New York State Energy Research and Development Authority (NYSERDA). Empire Wind 1, which was due to come online in 2027, has the potential to power 500,000 New York homes.

“Halting construction of fully permitted energy projects is the literal opposite of an energy abundance agenda,” said American Clean Power Association CEO Jason Grumet in a statement. “We encourage the administration to quickly address perceived inadequacies in the prior permit approvals so that this project can complete construction and bring much-needed power to the grid.”

As Electrek reported, Equinor secured $3 billion to finance Empire Wind 1 in January. The total amount drawn under the project finance term loan facility as of March 31 was around $1.5 billion.

As of March 31, Empire Wind has a gross book value of around $2.5 billion, including South Brooklyn Marine Terminal (pictured above), which was expected to become the US’s largest dedicated port facility for offshore wind.

In response to BOEM’s stop work order, New York Governor Kathy Hochul issued the following statement:

Every single day, I’m working to make energy more affordable, reliable and abundant in New York and the federal government should be supporting those efforts rather than undermining them. Empire Wind 1 is already employing hundreds of New Yorkers, including 1,000 good-paying union jobs as part of a growing sector that has already spurred significant economic development and private investment throughout the state and beyond.

As Governor, I will not allow this federal overreach to stand. I will fight this every step of the way to protect union jobs, affordable energy and New York’s economic future.

Equinor says it’s considering appealing BOEM’s order.

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Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisers to help you every step of the way. Get started here. –trusted affiliate link*

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