What to expect as Big Oil reports second-quarter earnings

Published

3 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.

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A 350-mile electricity transmission line in Nevada is now approved

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7 hours ago

September 13, 2024

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A 350-mile electricity transmission line in Nevada is now approved

Transmission lines Searchlight, Nevada, March by U.S. National Archives is licensed under CC-CC0 1.0

The massive Greenlink West Transmission Project in Nevada got the final green light this week by the US Department of the Interior.

The project will create a new 525 kV transmission line that will stretch 350 miles from Las Vegas to Yerington, southwest of Reno, and greatly increase Nevada’s grid capacity. It will cross federal, state, Tribal, and private lands in seven counties.

Once completed, utility NV Energy’s Greenlink West will be able to carry up to 4,000 megawatts (MW) of clean energy – enough to power over 4.8 million homes. Greenlink West is a critical part of Nevada’s push to ramp up renewable energy production and modernize its aging power grid.

Construction is expected to begin early next year, and the goal is to bring it online by May 2027.

Currently, a lot of the solar, geothermal, and wind energy generated in rural parts of the state can’t be efficiently sent to cities like Las Vegas and Reno, where demand is high. Greenlink West will fix that by connecting clean energy sources to urban centers.

Along with the 210-mile-long, 525 kV Greenlink North, which will span from Ely to Yerington and is still under environmental review, the two lines will tie into the existing One Nevada Transmission Line. The entire $4.24 billion transmission project, which is expected to generate $690 million in economic activity and create nearly 4,000 good-paying jobs, will result in a continuous triangle of high-voltage transmission lines in the state, as per the video below:

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The project will also include three 345 kV lines from Yerington to the Reno area.

Greenlink North is expected to be in service by December 2028.

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MicroStrategy stock pops 8% after company ups bitcoin holdings to $14.6 billion

Published

8 hours ago

September 13, 2024

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MicroStrategy stock pops 8% after company ups bitcoin holdings to .6 billion

MicroStrategy founder Michael Saylor speaks at the Bitcoin 2021 Conference in Miami on June 4, 2021.

CFOTO | Nurphoto | Getty Images

MicroStrategy shares jumped more than 8% on Friday after founder Michael Saylor said the company purchased another $1.1 billion worth of bitcoin.

The stock jumped 24% for the week and is now up 124% this year.

Saylor said in a post on social media platform X that MicroStrategy’s average purchase price in the four years it has been buying bitcoin is $38,585 per coin. Bitcoin is currently trading at close to $60,000.

MicroStrategy’s stash of 244,800 bitcoins is worth $14.6 billion.

Founded in 1989, MicroStategy has a business in enterprise software and cloud-based services, but its value is now almost entirely tied to its bitcoin ownership, effectively making the company a proxy for the world’s biggest cryptocurrency. It is the biggest corporate holder of the asset, according to Bitcoin Treasuries.

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Here are the EVs you can lease for under $300 a month this September [Updated]

Published

8 hours ago

September 13, 2024

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Here are the EVs you can lease for under $300 a month this September [Updated]

With more options than ever, driving an electric vehicle has never been more affordable. As new EVs hit the market, the lease deals are heating up. Here are all the EVs you can lease for under $300 a month this September.

A record 330,463 electric vehicles were sold in the US in the second quarter. According to Kelley Blue Book, EVs accounted for 8% of total new vehicle sales in Q2, up from 7.1% in the first three months of 2024.

The growth was driven by the influx of new models, massive discounts, and higher leasing rates. A big factor behind leasing is the ability to pass on the $7,500 federal tax credit to lessees.

Most automakers are slapping the $7,500 on top of additional incentives like lease bonus cash, conquest, and loyalty offers. In total, the savings amount to over $10,000 in many cases.

According to Motor Intelligence, Kia’s new three-row EV9 SUV sold with an average discount of over $19,700 in July. The Honda Prologue and Volkswagen sold with an average discount of $7,035 and $13,015, respectively.

EVs you can lease for under $300 a month in September

As the discounts continue to pile up, several EVs are available to lease for under $300, even $200 a month this September. According to an analysis from online auto research firm CarsDirect, here are some of the best electric vehicle lease deals this month (find deals in your area at the bottom).

For smaller (subcompact) SUVs, the 2024 Kia Niro Wind EV is listed at $169 for 24 months. With $3,999 due at signing, it has an effective cost of $336 per month.

Although that may sound intriguing, other electric models are available at even more affordable monthly rates.

For example, the 2024 Honda Prologue EX at $269 for 36 months. With only $1,999 due at signing, Honda’s electric SUV can be leased for an effective rate of $325 a month.

The Prologue EX also has a range of up to 296 miles, compared to the Niro EV, which has an EPA-estimated 253-mile driving range. Despite the Prologue’s higher starting price ($47,400 vs $39,600), Honda offers more incentives, including a loyalty (or conquest) bonus.

Volkswagen’s ID.4 is available for $219 for 36 months. With $3,499 due at signing, the 2024 Volkswagen ID.4 Standard has an effective cost of $316 per month.

Electric Vehicle	Monthly Rate	Term (months)	Due at Signing
2024 Kia Niro Wind EV	$169	24	$3,999
2024 VinFast VF 8	$199	36	$894
2024 Kia EV6	$209	24	$3,999
2024 Hyundai IONIQ 5	$209	33	$3,999
2024 Volkswagen ID.4	$219	36	$3,499
2024 Honda Prologue	$269	36	$1,999
2024 Hyundai IONIQ 6	$299	33	$3,999

EVs for lease under $300 per month in September 2024

After unveiling the updated US-built 2025 model, Hyundai’s IONIQ 5 is one of the best EVs to lease in September.

The 2024 Hyundai IONIQ 5 SEL RWD is listed at $209 for 33 months. With $3,999 due upfront, you can drive off in a new IONIQ 5 for $330 a month.

Hyundai’s electric fastback, the IONIQ 6, is listed at $299 for 33 months. The 2024 IONIQ 6 SEL RWD, with $3,999 due at signing, has an effective cost of $420 per month.

Its third EV, the Kona Electric, is slightly more expensive at $362 for 24 months. That’s for the 2025 Kona SEL EV with up to 261 miles range. With $1,991 due upfront, the Kona EV costs $445 a month.

Kia’s EV6 is another top EV lease option this month. The 2024 Kia EV6 Light Long Range RWD is listed at just $209 for 24 months. Kia states that $3,999 is due at signing, amounting to a $376 monthly rate.

After Kia introduced a new Tesla Conquest Cash discount, Tesla drivers (buyers and lessees) can score an extra $1,500 off the EV9 and $1,000 off the EV6.

With the discount, Kia’s EV6 is even cheaper to lease than a Soul at just $179 per month ($346 effective rate) despite costing more than double.

Although not on the list, the Subaru Solterra is also a steal in September. The 2024 Subaru Solterra Premium starts at $329 per month (36 months) with no money down.

Ready to save big? We can help you get started. Check out our links below to find deals on EVs in your area.

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