Oil and Gas Majors Report Strong Q2 Results

By Malcolm Ramsay

Momentum for upstream project development in the oil and gas sector has continued to build this year, with the publication of positive second quarter results by several energy majors.

A rebound in oil prices in 2021 has helped to drive firms back towards profitability and stringent cost-cutting measures, implemented in response to falling prices last year, have also helped to boost the bottom-line.


Buybacks Drive Positive Outlook

U.S. oil and gas firms led positive news, with Chevron announcing a major buyback program to soothe investors and a significant rebound in profitability, with earnings of $3.1 billion, compared to a loss of $8.3 billion in the same period last year.

“Second quarter earnings were strong, reflecting improved market conditions, combined with transformation benefits and merger synergies,” said Mike Wirth, Chevron chairman. “Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending We will resume share repurchases in the third quarter at an expected rate of US$2 billion to US$3 billion per year.”

Chevron’s U.S. upstream operations earned US$1.4 billion in the second quarter due to higher crude oil realizations and the absence of impairments, write-offs and severance accruals seen in 2020.


ExxonMobil Record Chemical Result

ExxonMobil said its earnings increased US$5.8 billion over the second quarter of 2020, driven by oil and natural gas demand and chemical and lubricants performance.

“Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our products,” said Darren Woods, CEO of ExxonMobil. “We’re realizing significant benefits from an improved cost structure, solid operating performance and low-cost-of-supply investments that, together, are generating attractive returns and strong cash flow to fund our capital program, pay the dividend and reduce debt."

The firm reported second-quarter capital and exploration expenditures of US$3.8 billion, bringing the first half to US$6.9 billion, and anticipates higher second-half spending on key projects, including Guyana, Brazil, Permian, with full-year spending of US$16 billion to US$19 billion. 

The firm reported exceptional results from its chemical business, which delivered the best quarter in the company’s history. Cash flow of US$9.7 billion from operating activities funded the firm’s dividend, capital investments and debt reduction programmes.

This positive cash position has allowed it to move forward with investment this year, giving an affirmative funding decision for the massive Bacalhau development in Brazil among other upstream projects.


Capex Increases

In Europe, oil majors also reported a strong second quarter, with Shell announcing a US$2 billion share buyback program, along with a 40 percent dividend hike.

France’s TotalEnergies posted a strong second quarter, with adjusted net income of US$3.5 billion, up 15 percent from first quarter 2021. The firm’s CEO Patrick Pouyanne also predicted that capex would increase to US$13 billion to US$14 billion in 2022, enabling the firm to relaunch short-cycle capex projects, but cautioned over larger projects, noting "we have suffered quite a lot of volatility, and it is also true that when you have underinvestment, you give support to higher prices."

“Operating performance was resilient in the second quarter with four major project start-ups, strong momentum in the customers business, including material growth in convenience gross margin, and delivery of US$2.5 billion of cash costs savings on a run-rate basis relative to 2019, around six months earlier than targeted,” a spokesperson for BP said.