PQ Group earnings fall as COVID-19 dings demand

MOSCOW (MRC) -- PQ Group today reported second-quarter net income down 48.0% year-on-year (YOY), to USD15.9 million, on sales down 16.7%, to USD359.5 million, said Chemweek.

Adjusted earnings totaled 22 cents/share, ahead of analysts’ consensus estimate of 19 cents/share, as reported by Refinitiv (New York, New York). The declines were “largely on lower volume from COVID-19 impacts related to stay-at-home mandates and demand disruption for industrial applications,” PQ says.

Performance chemicals segment sales declined 19.8% YOY, to $142.6 million, while segment adjusted EBITDA was down 17.5%, to USD34.0 million. Demand from industrial applications declined during the quarter, but demand from personal care applications generally held up well.

Performance materials segment sales fell 12.3% YOY, to USD104.3 million, while segment adjusted EBITDA declined 6.5%, to USD27.3 million. Lower industrial demand and lower demand from European highway striping activity was partly offset by solid North American highway striping activity.

Refining services segment sales fell 22.9% YOY, to USD90.4 million, on lower gasoline consumption and weaker demand from the automotive and industrial sectors. Catalysts sales grew on higher demand for polyolefin, chemical, specialty, and hydrocracking catalysts.

As MRC informed earlier, Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.
MRC

MOSCOW (MRC) -- Total has swung to a net loss for the second quarter of 2020 of USD8.37 billion from a profit of USD2.76 billion in the prior-year period, due largely to a USD8.1-billion impairment after lowering its future oil and gas price assumptions and cutting the value of some of its upstream oil and gas assets, said Chemweek.

On an adjusted earnings basis it reports income of USD126 million, 96% lower year-on-year (YOY) but beating analysts’ consensus expectations for a net loss of about USD520 million, as reported by Refinitiv (New York).

The company says the lower adjusted earnings were due to lower Brent crude oil and natural gas prices, reduced refining margins, and the impact of the COVID-19 pandemic on demand. Net cash flow fell to USD226 million in the second quarter from USD3.3 billion a year earlier, with group sales plunging by over 50% YOY to USD25.7 billion.

Total does not state its chemicals earnings separately, reporting a 20% decline YOY in its adjusted net operating income to USD575 million for its combined refining and chemicals business. The decrease was “notably due to an even more severely degraded refining margin environment in the second quarter and low plant utilization of 59%,” it says. This was partially offset “by resilient petrochemical margins” and a good performance from its trading activities, it says. Refining and chemicals net sales in the quarter plunged over 60% YOY to USD11.92 billion from USD30.04 billion.

Olefins monomer production rose 40% YOY to 1.39 million metric tons, although last year’s equivalent quarter was impacted by planned maintenance of steam crackers in Daesan, South Korea; and Port Arthur, Texas. Polymer production grew by 6% compared to the prior-year period to 1.19 million metric tons, again partly due to the maintenance work last year at Daesan, Total says.

By region, petchems production of both olefins and polymers fell 3% YOY in Europe during the second quarter to 1.27 million metric tons, while petchems output in the Americas rose 34% to 637,000 metric tons. In the Middle East and Asia, petchems production more than doubled to 672,000 metric tons.

Total says oil prices have strengthened since the start of June but that the oil environment “remains volatile, given the uncertainty around the extent and speed of the global economic recovery post-COVID-19.” Net investments in 2020 will be kept below USD14 billion, while the company will achieve savings of USD1 billion in operating costs compared to 2019, it says.

As MRC informed before, Total has recently disclosed that it is evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

MOSCOW (MRC) -- Indian Oil Corp, the country’s top refiner, will continue to operate its refineries below capacity in 2020/21 as it sees local and overseas fuel demand remaining subdued, reported Reuters with reference to IOC Chairman S. M. Vaidya's statement.

IOC, along with its unit Chennai Petroleum, controls about a third of India’s five million-barrels-per-day (bpd) refining capacity.

Vaidya said refinery runs have declined to about 75% from 93% in early July on low fuel demand.

He said the operations are expected to remain at 70%-75% for the remainder of the fiscal year through March 2021.

“It is very difficult to predict... We don’t expect demand to recover to pre-COVID levels in the near future,” he said, adding the company could raise refinery runs to 90% if demand recovers.

Indian refiners are cutting crude processing and shutting units for maintenance as local fuel demand falls and global refining margins are weak, company officials said.

Vaidya said IOC has shut its 300,000 bpd Pardip refinery on the east coast for maintenance and has plans to shut some units its 274,000-bpd Koyali refinery in the west for repairs this fiscal year.

Indian refiners are also reducing run rates as the export market is not attractive and rising fuel exports from China are likely to increase the pressure on Asian refining margins.

On Friday IOC reported a 47% decline in its June quarter profit as lockdowns hammered fuel demand and squeezed its refining margins to minus $1.98 per barrel.

Vaidya hoped oil prices would stay at around $40 per barrel in the second half of 2020. He also said to boost revenue IOC would look at maximising petrochemicals production at its refineries.

As MRC wrote before, Indian Oil Corporation Ltd (IOCL) was in plans to undertake a planned shutdown at its polypropylene (PP) plant in Paradip last weekend. The plant is expected to remain under maintenance for about two weeks. Located at Paradip in the India state of Odisha, the PP plant comprises of two lines with a production capacity of 340,000 mt/year each.

We remind that Indian Oil Corp restarted operation at its naphtha cracker in India in early-October, 2019, after completing maintenance works. The cracker was shut in early-September, 2019 for a maintenance turnaround. Located in Panipat, in the northern Indian state of Haryana, the cracker has an ethylene production capacity of 857,000 mt/year and propylene capacity of 425,000 mt/year.

According to MRC's DataScope report, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Indian Oil Corporation Limited, or IndianOil, is an Indian state-owned oil and gas corporation with its headquarters in New Delhi, India.
MRC

MOSCOW (MRC) -- ExxonMobil Corp is preparing deep spending and job cuts, according to people familiar with the matter, as it fights to preserve a 8% shareholder dividend with a multi-billion-dollar quarterly loss looming, as per Hydrocarbonprocessing.

It was unclear how extensive the cuts will be. The largest US oil company slashed this year’s budget by 30% in April, but Chief Executive Darren Woods’s turnaround through rebounding demand and increased asset sales have not panned out and losses are climbing.

On Friday, Exxon is expected to report a USD2.63 billion second-quarter loss, according to Refinitiv Eikon data, on sharply lower prices and weaker production, the first back-to-back quarterly losses in at least 36 years. Shares are down 35% so far this year as the coronavirus pandemic has crushed fuel demand.

The latest cost cuts are needed to preserve the company’s nearly USD15 billion annual payout to shareholders in the face of rising losses, the people said. Exxon will not generate enough cash from production operations to cover this year’s dividend, analysts have said. It borrowed USD18 billion earlier this year to bolster cash.

Woods so far this year held to the view that oil, natural gas and petrochemicals demand would rebound following an historic crash that saw global consumption fall by roughly one-third and US prices plunge into negative territory in April.

Rivals BP Plc, Royal Dutch Shell and Total have slashed up to USD45 billion in the combined value of their oil and gas properties. Meanwhile, Exxon’s 2019 plan to raise USD15 billion by 2021 through asset sales has gotten off to a slow start, fizzling this year due to lackluster demand from potential buyers.

With energy prices expected to remain lackluster for years, Woods has turned to spending and staff cuts, and a business restructuring to salvage the payout. Rival Chevron Corp has stood out as producing enough cash from operations to cover its dividend.

Even if it does retain its full dividend this year, a cut is “a real possibility in 2021,” given the outlook for oil, said Jennifer Rowland, an analyst with Edward Jones. “There is only so much Exxon can continue to lean on its balance sheet before they start to jeopardize” the payout, Rowland said.

The dividend, which yields about 8% at Wednesday’s closing price of USD44.03 a share, is sacrosanct at Exxon, which until this year raised the payout annually for 37 years. Its market value, however, has dropped by half since Woods took over in January 2017.

Exxon has no plans for layoffs due to the pandemic and no percentage targets to reduce its workforce through this year’s employee reviews, said spokesman Casey Norton.

“We are continually monitoring market conditions and our deep portfolio has flexibility to adjust our plans,” Norton said.

Still, Exxon late last year changed its employee review system, internally referred to as forced ranking. The revision could increase the number of workers who land in the bottom category - to between 8% and 10% up from 3% last year. Those in the bottom category can either strive to meet their manager’s performance goals or leave with 90 days’ pay, person familiar with the matter said.

The ranking applies only to its US professional staff. It has 74,900 employees worldwide, and about 40% are in the United States.

In April, Exxon slashed this year’s capital spending budget to USD23 billion, down USD10 billion from the start of the year and to the lowest in four years. At the time, Woods said he could further revise spending this year or next.

Prior to the pandemic, Woods had vowed investments in new fields, new and expanded chemical and refining operations would revive Exxon’s earnings and production.

In early 2019, he predicted investments in production and refining could produce a USD4 billion increase in earnings this year over last and reach up to USD21.5 billion by 2025 at USD40 a barrel oil, slightly below the current price.

Woods also set a target to bring in USD15 billion from asset sales between 2019 through 2021. Last year, it the sales brought in nearly USD3.7 billion but proceeds this year are only USD86 million.

“It has fallen a bit behind schedule but there have been reports there are several packages out,” said Cowen analyst Jason Gabelman, who expects Exxon to reiterate the asset sale target on Friday.

Wall Street will watch for new capital and operating expense cuts “and other available levers to defend the dividend,” Gabelman said.

As MRC informed before, boiler work at the ExxonMobil-operated 830,000-metric tons/year ethylene plant at Mossmorran, UK, was scheduled for completion in June, 2020. Two of the three boilers at the plant exploded in August 2019, resulting in the plant being taken offline until the end of February. OPIS sources said in May that the plant was currently able to operate at full capacity with two boilers in operation but that the third boiler would be working by June.

We remind that in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Phillips 66 posted a smaller-than-expected loss as the refiner's retail marketing business, which buys and resells petroleum products, benefited from a decline in prices following the coronavirus crisis, reported Reuters.

The unit buys refined products from others and resells them, pocketing the difference and benefiting from improved margins when prices are down. The unit also sells other specialty products, including lubricants.

Credit Suisse analyst Manav Gupta said the marketing segment's earnings before interest and taxes of USD293 million beat the brokerage's estimate of USD220 million.

Refiners are seeing signs that fuel demand is picking up gradually worldwide as travel restrictions are eased, but a second wave of cases could lead to renewed lockdowns and derail demand recovery.

Rival PBF Energy Inc, which posted a bigger-than-expected loss, said the low point of demand, particularly for gasoline and diesel, appears to have passed with demand rebounding to about 80% of pre-COVID levels.

The company said jet fuel will likely take much longer to recover, and that it will continue to operate at lower volumes till "sustained product demand justifies higher production."

Phillips 66 reported a loss of 74 cents per share, smaller than the 93 cents analysts had expected, according to IBES data from Refinitiv.

"We believe this will be a trend this quarter and both MPC (Marathon Petroleum Corp) and DK (Delek US Holdings Inc) will put up earnings upside surprises driven by retail businesses," Gupta said.

Smaller rival Valero, which reported a smaller-than-expected loss on Thursday, said it saw a rapid recovery in demand in the second quarter and forecast current-quarter throughput, the amount of crude processed at its refineries, to rise over 5% sequentially.

As MRC informed earlier, US-based Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC