A mixed day for oil and oil stocks on Friday. While prices bounced a little on the day, they still lost ground for the week, three big US and European oil companies reported weaker first quarter results thanks to the sharp drop in natural gas prices in the three months to March, and American oil drillers reported their biggest cut in active rig use in five months.
Of the trio of events, the slide in active oil and gas rig numbers was the most telling, because the active totals for both were the lowest for quite some time and not what you’d expect to see when oil prices are firm and gas prices have bounced a little from the lows in the first quarter.
Exploration companies cut five oil rigs -- the biggest weekly drop since November, said energy services firm Baker Hughes said in its weekly report on Friday -- taking the number to 506, which is only six above the 500 at the end of December.
Gas rigs in use also slumped -- by only one, but that took the total to just 105, the lowest since the depths of the pandemic in December 2021.
The cuts saw the total oil and gas rig count fall to 613 by last Friday, down six and the lowest since February 2022. The total is also eight lower than the 621 total at the end of the first quarter.
Baker Hughes said that puts the total rig count down 142 rigs, or 18.8%, below this time last year.
Even though it wasn’t intended, analysts said there was a nice juxtaposition between the two-and-a-half year low for gas rig numbers and the damage done to oil company earnings in the March quarter.
Meanwhile, even though analysts had lowered their expectations for the sector, the reports from the trio of giants wasn’t encouraging. Exxon shares fell, but shares in Chevron and France’s TotalEnergies rose by Friday’s close as investors ignored the obvious in some cases.
Exxon Mobil missed Wall Street earnings targets thanks to a larger-than-forecast drop in natural gas earnings, but Chevron beat lowered expectations with better-than-expected US oil production. TotalEnergies slightly beat lowered analysts forecasts as good refining margins partially offset a steep drop in profits from natural gas.
Exxon's profit fell 28%, Chevron saw a 16% slide and TotalEnergies was down 22% year-on-year, with the two US oil majors also taking a toll from weaker profits from gasoline and fuels. TotalEnergies CEO Patrick Pouyanne warned that the higher oil prices that have offset weak natural gas profits could cut into refining margins later this year.
Henry Hub futures, the benchmark for US gas supply, trading and pricing, has been trading below $US1.70 per million British thermal unit (mmBtu), and earlier this year dropped to a 3-1/2-year low on warm weather and oversupply. It closed at $US1.92 on Friday.
Global benchmark Brent crude prices were largely flat against a year ago at $US81.76 a barrel in the quarter. US West Texas Intermedia style crude ended at $US83.68 on Friday while Brent crude finished at $US88.06.
Still, the trio didn’t go poor with over $US18 million in earnings between them for the three months.
Exxon did post an $US8.5 billion profit, its second highest for the first quarter in more than a decade, while Chevron earned $US5.5 billion and TotalEnergies delivered $US5.1 billion in adjusted net earnings (and reconfirmed a $US2 billion buyback which always encourages the restless among investors).
Both crudes ended the week with small gains of less than 1%.
