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Energy ETFs In Focus On Big Oil Earnings

oil gasBig U.S. oil companies like Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP) reported their results last week for the first quarter. While COP fueled a rally in the broad energy sector, XOM and CVX saw modest decline in their share prices following the earnings announcement.

Amid the booming shale oil and gas business, the three big oil companies are still struggling with shrinking production volumes. This is especially true as domestic oil and natural gas production at Exxon dropped 5.6% while Chevron oil and natural gas production slipped 3.6%. Conoco experienced a modest production decline of 1.8% in the first quarter.

Earnings for Big Oil Companies in Focus

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The largest U.S. oil company, Exxon Mobil, reported earnings of $2.10 per share for the first quarter. Though earnings outpaced the Zacks Consensus Estimate of $1.88 thanks to lower exploration cost, higher natural gas prices and strength in upstream division, it deteriorated from the year-ago earnings of $2.12.

Total revenue dropped 1.5% year over year to $106.8 billion, missing the Zacks Consensus Estimate of $111.4 billion. The lackluster result was primarily due to lower oil and gas output that dropped for the tenth time in the past 11 quarters as well as weak international refining and chemicals businesses (read: Will BP Continue to Fuel Rally in These Energy ETFs?).

Similar to Exxon, earnings at ConocoPhillips – the third largest U.S. oil company – strongly beat our estimate by 24 cents and surged 27.5% from the year-ago quarter. This is mainly thanks to rising output in Texas and North Dakota as well as higher natural gas prices. Revenues rose 9.5% year over year to $16.05 billion and comfortably surpassed our estimate of $15.51 billion.

Chevron, which trails Exxon Mobil, was hit by lower global production and declining oil prices in the quarter. Earnings per share came in at $2.36, falling short of the Zacks Consensus Estimate of $2.53 and declining from the year-ago earnings of $3.18. Revenues fell 6.3% to $53.26 billion and were a far cry of the Zacks Consensus Estimate of $66.45.

Market Impact

The mixed performance from these three giants along with favorable supply/demand trends keeps the broad energy sector on a close watch by investors. Both XOM and CVX have a poor Zacks Industry Rank which is in the bottom 32% while COP has a solid Zacks Rank in the top 10%.

Further, the stocks retain a Zacks Rank #3 (Hold), suggesting more room for upside. The ongoing tension in Russia and more sanctions against the country could disrupt the global oil supply that is considered favorable for the industry. 

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