First quarter earnings are starting to roll in, giving us a handle on the health of the oil and gas industry. Today, I will review earnings from several different segments of the energy sector.
Chevron
For the first quarter, Chevron reported a decline in earnings of 27% from the previous year to $2.65 billion. But analysts were expecting worse, as earnings per share of $1.39 still beat consensus estimates of $1.30 per share.
Hardest hit was Chevron's downstream business, which declined from $728 million a year ago to $252 million in Q1. During times of rising oil prices -- which was the case in Q1 -- refining margins tend to erode as gasoline prices usually lag the rise in oil prices. Chevron was also hit by a decline in refinery output of 7%, primarily due to weather-related impacts at the El Segundo and Richmond, California refineries.
The bright spot in Chevron's earnings was domestic oil and gas production, where earnings rose to $748 million in first quarter 2019, compared with $648 million a year earlier. Net oil-equivalent production of 884,000 barrels per day was up 151,000 barrels per day from a year earlier. Production increases were driven by shale and tight properties in the Permian Basin, and in the Gulf of Mexico.
ExxonMobil
For the first quarter of 2019, ExxonMobil reported net income of $2.35 billion versus $4.65 billion a year ago.
This translated to earnings of $0.55 per share versus $1.09 per share a year ago. The company fell well short of consensus estimates of $0.70 per share. Revenue fell 6.7% from a year ago, but the $63.6 billion in revenues slightly beat expectations of $63 billion.
Unlike Chevron, ExxonMobil reported lower earnings in its U.S. upstream business. During Q1, ExxonMobil earned $96 million for this segment, versus $429 million a year ago.
ExxonMobil took an even bigger hit to the bottom line than Chevron from its downstream businesses. For Q1, ExxonMobil reported a downstream loss of $256 million versus a profit of $940 million a year ago. This was due to lower margins and significant scheduled maintenance, which caused ExxonMobil's refinery throughput to decline to 3.9 million barrels per day versus the year-earlier level of 4.3 million barrels per day.
Kinder Morgan
Most midstream companies have yet to report earnings. However, Kinder Morgan, one of the biggest of the midstream corporations, reported first quarter earnings in line with consensus estimates.
For the first quarter, Kinder Morgan reported net income of $556 million, compared to $485 million in the first quarter of 2018. Kinder Morgan's Q1 revenues increased year-over-year by 0.3% to $3.429 billion.
Distributable cash flow (DCF) -- an important measure for midstream companies -- rose by 10% year-over-year to $1.371 billion.
Almost every measure of financial performance increased for Kinder Morgan year-over-year, but the biggest story is the performance of the Natural Gas Pipelines segment. Natural gas transport volumes were up 4.5 billion cubic feet per day, or 14%, compared to the first quarter of 2018. This marked the fifth straight quarter that year-over-year volumes had grown by at least 10%, and is being driven primarily by higher volumes from the Permian Basin and Denver-Julesburg Basin.
Kinder Morgan also announced a 25% increase in its dividend over the previous quarter. The company expects to pay $1.00 per share for all of 2019, which would represent a forward dividend yield of 4.94%.
Valero
Given the poor performance of the downstream businesses of Chevron and ExxonMobil, one would expect a poor quarter from refiner Valero. Indeed, total revenues fell 8.2% to $24.3 billion, compared to $26.4 billion in the prior-year quarter. Earnings fell to $0.34 per share, which was down from $1.00 a share a year ago, but significantly better than the consensus estimate of $0.20 a share.
The earnings beat was attributed to higher average ethanol production volumes and the expansion of the company's Diamond Green Diesel plant.
Refining margin per barrel of decreased to $7.97 from the year-ago level of $8.65. Refining operating expense per barrel increased to $4.15, versus $3.83 in the year-ago quarter.
Refinery capacity utilization for the quarter was 91%, with throughput volumes declining 66,000 barrels per day from the prior year to 2.9 million barrels per day.
Investors were pleased with the results, as the share price jumped 3.5% following the earnings release. Valero also announced a quarterly dividend of $0.90 per share, which translates to a forward annualized yield of 3.97%.
ConocoPhillips
ConocoPhillips is the world's largest independent pure oil and gas producer, and the company's earnings are a bellwether for the upstream segment.
During the first quarter, ConocoPhillips reported earnings per share of $1.00, beating the consensus estimate of $0.92 per share. This marked the fourth straight quarter ConocoPhillips has surpassed consensus estimates. Total earnings for the quarter were $1.1 billion.
Total production excluding Libya for the first quarter of 2019 was 1.318 million barrels of oil equivalent per day, an increase of 7.7% compared with the same period a year ago. Production in the Lower 48 Big 3 unconventional plays (Permian, Eagle Ford, and Bakken) grew by 30% year-over-year.
ConocoPhillips generated $2.9 billion in cash from operations (CFO), which was more than enough to cover capital expenditures and investments ($1.6 billion), share repurchases ($0.8 billion) and dividends ($0.3 billion). During the quarter, 37% of CFO generated was returned to shareholders. At the end of the quarter, the company had on hand $6.7 billion of cash and short-term investments.
