U.S. majors Exxon, Chevron post blowout earnings, ramp up buybacks

The two largest U.S. oil companies, ExxonMobil and Chevron, posted record revenue on Friday, bolstered by surging crude oil and natural gas prices and following similar results for European majors a day earlier, said Reuters.

The U.S. pair, along with UK-based Shell and France's TotalEnergies, combined to earn nearly USD51 B in the most recent quarter, almost double what the group brought in for the year-ago period. All four have ramped up share buybacks in recent months, capitalizing on high margins derived from selling oil and gas.

Exxon outpaced its rivals with second-quarter net income of USD17.9 B, several billion dollars ahead of its previous record reached in 2012, which was aided by asset sales in Japan. The fifth major, BP Plc, reports next week.
The companies posted strong results in their production units, helped by the surge in benchmark Brent crude oil futures , which averaged around USD114 a barrel in the quarter.

High crude oil prices can cut into margins for integrated oil majors, as they also bear the cost of crude used for refined products. However, following Russia's invasion of Ukraine and numerous shutdowns of refineries worldwide in the wake of the coronavirus pandemic, refining margins exploded in the second quarter, outpacing the gains in crude, adding to earnings.

"The strong second-quarter results reflect a tight global market environment, where demand has recovered to near pre-pandemic levels and supply has attritted," said Exxon Chief Executive Darren Woods, in a call with analysts. "Growing supply will not happen overnight."

The results from the majors are sure to draw fire from politicians and consumer advocates who say the oil companies are capitalizing on a global supply shortage to fatten profits and gouge consumers. U.S. President Joe Biden last month said Exxon and others were making "more money than God" at a time when consumer fuel prices surged to records.

Earlier this month, Britain passed a 25% windfall tax on oil and gas producers in the North Sea. U.S. lawmakers have discussed a similar idea, though it faces long odds in Congress. A windfall tax does not provide "incentive for increased production, which is really what the world needs today," said Exxon Chief Financial Officer Kathryn Mikells, in an interview with Reuters.

The companies say they are merely meeting consumer demand, and that prices are a function of global supply issues and lack of investment. The majors have been disciplined with their capital and are resisting ramping up capital expenditure due to pressure from investors who want better returns and resilience during a down cycle. "In the short term (cash from oil) goes to the balance sheet. There's no nowhere else for it to go," Chevron CFO Pierre Breber told Reuters.

Worldwide oil output has been held back by a slow return of barrels to the market from the Organization of the Petroleum Exporting Countries and allies, including Russia, as well as labor and equipment shortages hampering a swifter increase in supply in places like the United States.

Exxon earlier this year more than doubled its projected buyback program to USD30 B through 2022 and 2023. Shell said it would buy back $6 B in shares in the current quarter, while Chevron boosted its annual buyback plans to a range of USD10 B to USD15 B, up from USD5 B to USD10 B. Exxon shares were up 3.2% to USD95.60 in morning trading. Chevron shares rose 6.5% to USD160.06.

We remind, a workers' strike at Exxon Mobil's Esso refinery in Fos-sur-Mer in southern France stopped on Saturday and the halted units are being restarted. "We're doing everything to ensure that operations and supplies resume at the earliest so that we can serve our clients as soon as possible," said Esso spokeswoman Catherine Lebrun. The strike resulted in the refinery being temporarily shutdown on Friday. Exxon's Fos site has a refining capacity of 7 million tonnes per year, which corresponds to about 10% of national capacity, according to the company. The walkouts at Esso started on June 28, with workers demanding higher wages to cover inflation. They were part of wider union efforts this week that have hit other energy companies such as state-owned electric power utility EDF .
mrchub.com

Arkema's net income surged by 66% year on year in the second quarter, supported by higher prices to adapt to the very strong increase in feedstock costs, said the company.

Arkema says adjusted net profits in the second quarter of 2022 increased 65.9% year on year (YOY), to EUR443.0 million (USD453.7 million), on sales higher 32.9% YOY, to EUR3.18 billion, driven by strong growth in all segments. EBITDA rose 47.5% YOY, to EUR705.0 million, beating analysts’ consensus estimate of EUR628.7 million, provided by S&P Capital IQ.

Volumes were down 5.3% YOY, but prices were up 28.5% YOY, reflecting mainly raised selling prices to adapt to the very strong increase in raw materials, energy, and transportation costs; better market conditions in upstream acrylics; and product mix improvement, Arkema says.

There was positive volumes growth in the US, driven by underlying demand that remained well oriented in most end markets, and in Asia despite the lockdowns in China, but volumes were impacted by the slowdown observed in Europe, notably in the construction and automotive markets, the company says.

We remind, Arkema has set itself an ambitious target, based on an SBT (Science Based Target) approach, to reduce its scope 1 and 2 greenhouse gas (GHG) emissions and its scope 3 emissions by 46% by 2030 relative to 2019.
Thus, the Group is raising its level of commitment from well below 2°C to 1.5°C, and now also includes all scope 3 emissions. This decarbonization target is based on energy efficiency and the evolution of the energy mix of Arkema’s industrial activities for scopes 1 and 2. Regarding scope 3, it includes the reduction of the most emissive activities, innovation contributing to a reduction in greenhouse gas emissions and suppliers’ commitment upstream of the value chain.

mrchub.com

Italian energy group Eni believes it will be able to completely replace Russian gas imports by 2025 as uncertainty over Moscow's energy supplies to Europe forces countries to seek alternative sources, said Reuters.

After signing new gas supply agreements with Algeria, Egypt and Congo earlier this year, Eni sees additional opportunities arising in other countries including Libya, Angola, Mozambique, and Indonesia, as well as in its home country.

The initiatives are designed to secure up to an equivalent of 100% of Russia's 20 Bcm3 of annual gas exports to the Italian market by 2025, the group said on Friday.

Under the plan, Algeria is expected to provide up to 6 Bcm3 of additional gas by 2023, reaching up to 9 Bcm3 by 2024, Eni said in a post-result presentation. "Recently we discovered gas in Algeria ... we are also working very well, with good coordination, with (Algeria's)Sonatrach, so it could be possible to accelerate and increase," Eni's CEO said during a conference call with analysts.

Eni, whose main shareholder is the Italian state, is one of the biggest wholesale buyers of Russian gas. Since mid-June Russia's Gazprom has been supplying less gas than requested to Eni, and European countries fear it could completely halt its supplies in the coming months.

Eni is confident its global gas & LNG portfolio division (GGP) will be at least free-cashflow positive in 2022 even if Moscow shuts off its gas supplies from this winter, GGP Director Cristian Signoretto said after the group reported Q2 results above expectations.

We remind, Gazprom has told customers in Europe it cannot guarantee gas supplies because of 'extraordinary' circumstances, upping the ante in an economic tit-for-tat with the West over Moscow's invasion of Ukraine.
The July 14 letter from the Russian state gas monopoly said it was retroactively declaring force majeure on supplies dating from June 14.
mrc.ru

Covestro reduces its forecast for EBITDA, free operating cash flow (FOCF), return on capital employed over weighted average cost of capital (ROCE over WACC) and greenhouse gas emissions, measured via CO2 equivalents, for fiscal year 2022, said the company.

This is a consequence of a recent significant further increase in energy costs and a further weakening global economy.

Covestro adjusts its forecast for fiscal year 2022 as follows: EBITDA is expected to be between EUR 1,700 million and EUR 2,200 million. The previous forecast projected EBITDA between EUR 2,000 million and EUR 2,500 million. The consensus expected this figure to be EUR 2,342 million.

Free operating cash flow (FOCF) is expected to be between EUR 0 million and EUR 500 million. The previous forecast projected FOCF between EUR 400 million and EUR 900 million. The consensus expected this figure to be EUR 598 million.

Return on capital employed over weighted average cost of capital (ROCE over WACC) is expected to be between -2 and +2 percentage points. The previous forecast projected ROCE over WACC between +1 and +5 percentage points.

Greenhouse gas emissions, measured via CO2 equivalents, are expected to be between 5.3 million tons and 5.8 million tons. The previous forecast projected greenhouse gas emissions between 5.5 million tons and 6.0 million tons.
In the second quarter 2022, Covestro EBITDA was EUR 547 million, which is slightly above the previous forecast between EUR 430 million and EUR 530 million. This was supported by a faster than expected normalization of the lockdown-burdened supply chain situation in China. The consensus expected this figure to be EUR 509 million. Second quarter 2022 FOCF was EUR -462 million. This included the bonus pay-out for the fiscal year 2021 of EUR 475 Mio.

Third quarter 2022 EBITDA is expected to be between EUR 300 million and EUR 400 million. The financial report for the second quarter 2022 will be published on August 2, 2022.

As per MRC, Neste, Covestro and South Korean petrochemical company SK geo centric are cooperating to enable the production of a major polyurethane raw material based on renewable raw materials via mass balance. The cooperation will see Neste provide SK geo centric with renewable Neste RE, an ISCC certified feedstock for polymers and chemicals made from 100% renewable raw materials such as waste and residue oil and fats.
mrchub.com

U.S. oil refiner Valero Energy Corp plans to operate its 14 refineries between 90%-93% of their combined total processing capacity in the third quarter, said Hydrocarbonprocessing, citing Bhullar, vice president of investor relations, during a conference call.

The top end of the company's operational plans are near the 94% the company's refineries operated at in the second quarter when Valero saw billions in profits on increased demand because of the recovery from the coronavirus pandemic amidst reduced global refining capacity. Gary Simmons, executive vice president and chief commercial officer, said demand for motor fuels continued at a record pace in June.

"There's really no indication of any demand destruction, Simmons during the conference call to discuss second quarter results. "In June, we actually set sales records. We sold 911,000 barrels a day (of motor fuels) in the month of June, which surpassed our previous record in August of '18 where we did 904,000 barrels a day." Lane Riggs, Valero's chief operating officer, said the company has shifted production to increase diesel output, as have other refiners, to make up for a diesel shortfall.

Third quarter production is planned to between 2.84 million bpd, or 90%, and 2.95 MMbpd, or 93%, of total combined throughput capacity, Bhullar said. The company's seven U.S. Gulf Coast refineries will operate at between 1.72 MMbpd, or 93%, and 1.77 MMbpd, or 95%, in combined capacity, he said.

Mid-continent refineries in the Texas panhandle, Oklahoma and Tennessee, are planned to run between 420,000 bpd, or 87% and 440,000 bpd, or 91%, in combined throughput. Two refineries in California will operate up to 90% of combined capacity. Refineries in Quebec and Wales are planned to run up to 92% of combined capacity.

As per MRC, Valero Energy Corp has issued an all-clear after a fire at its 205,000-bpd Houston, Texas, refinery and said the facility has been returned to routine operations, according to a community alert message. The fire has been extinguished. All personnel has been accounted for.
mrchub.com