Darren Woods, Ben van Beurden and Mike Wirth, three of the world\u2019s most powerful oil executives, forged their reputations by efficiently managing razor-thin margins at their companies\u2019 refineries.<\/p>\n
You wouldn\u2019t know it, though, given their latest earnings results.<\/p>\n
Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp., the companies they lead, all missed earnings estimates due to issues with their downstream units. At a time when dedicated refiners such as Phillips 66 and Valero Energy Corp. have become the rock stars of the earnings season, the integrated oil majors are struggling to meet optimistic estimates largely based on rising crude prices.<\/p>\n
\u201cThe market, looking at the numbers, clearly didn\u2019t know or expect the downtime\u201d at Exxon\u2019s refineries, said Doug Leggate, an analyst at Bank of America Merrill Lynch, during a call with company management. \u201cYou guys obviously did.\u201d<\/p>\n
The misses took the shine off share-buyback announcements for Shell and Chevron, while for Exxon, which posted earnings per share 27 percent lower than estimates, it was yet another results-day bloodbath, with $11 billion wiped off the stock within an hour of the first trade.<\/p>\n
The three oil giants missed earnings estimates by a wide margin<\/p>\n
Meanwhile, refining outages are a source of frustration for analysts and investors because many of them are scheduled, meaning they can be communicated to the market ahead of time and baked into their estimates. That clearly didn\u2019t occur this earnings season, said Mark Stoeckle said of Exxon, whose shares he manages among $2.5 billion at Adams Funds in Boston.<\/p>\n
\u201cThey knew that was going to happen, why didn\u2019t they share this with the sell side?,\u201d he asked. \u201cWoods has said \u2018we\u2019re working toward more transparency.\u2019 Well, they spit it out this quarter because they could have been more transparent about this but they weren\u2019t.\u201d<\/p>\n
Refining, a key stabilizing element of Big Oil\u2019s business model, is usually a world away from the deal-making, high-stakes exploration and big-spending world of upstream production. Downtime for maintenance is a necessity but usually scheduled. When it\u2019s not, it can throw the whole system out of whack.<\/p>\n
Bank of America\u2019s Leggate called on Exxon to \u201cfind some way of signaling\u201d analysts and investors on their refining plans \u201cto avoid the kind of volatility that we have quarter to quarter in your share price.\u201d<\/p>\n
Exxon\u2019s Senior Vice President Neil Chapman response: It\u2019s \u201ca valid point\u201d and \u201cof course we\u2019re taking that into account.\u201d Exxon\u2019s refinery outages, some of which were unplanned, are not a \u201csystemic\u201d problem, Chapman said. \u201cWe\u2019re all over it.\u201d<\/p>\n
Also See: Exxon drops on disappointing returns; Chevron sweetens pot<\/p>\n
Chevron\u2019s refining operations were also wildly outside of analysts\u2019 estimates. Its U.S. refineries earned 19 percent more than expected while international earned 56 percent less than estimated, Giacomo Romeo, a London-based analyst at Macquarie Capital (Europe) Ltd., wrote in a note.<\/p>\n
Shell also came under fire as its downstream division, along with trading and foreign exchange, was blamed for its adjusted net income for the second quarter of $4.69 billion falling short of even the lowest analyst estimate.<\/p>\n
\u201cWhat happened to the magic of capturing the margin?,\u201d asked Thomas Adolff, a London-based analyst at Credit Suisse AG, on a call with management.<\/p>\n
Van Beurden responded by admitting margins were \u201cweak\u201d but that was outside of the company\u2019s control.<\/p>\n
Big Oil\u2019s poor downstream performance lies in stark contrast to strong performances by U.S.-pure play refiners. Phillips 66 was one of three refiners to blow away investor expectations for the second quarter, more than doubling its earnings from a year earlier with 100 percent utilization at the company\u2019s fuel processing plants. Valero Energy Corp. and Marathon Petroleum Corp. also beat analyst\u2019s expectations.<\/p>\n","protected":false},"excerpt":{"rendered":"
Darren Woods, Ben van Beurden and Mike Wirth, three of the world\u2019s most powerful oil executives, forged their reputations by efficiently managing razor-thin margins at their companies\u2019 refineries. You wouldn\u2019t know it,…<\/p>\n","protected":false},"author":1,"featured_media":1378,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[46,57,90,96,107,137,139,160,174,184,201,202,209,232,233,244,246,249,256,267,277,279,288],"class_list":["post-1377","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-aramco","tag-baroudi","tag-democracy","tag-doha","tag-embargo","tag-gas","tag-gazprom","tag-international-maritime-disputes","tag-lebanon","tag-maritime-disputes","tag-offshore","tag-oil","tag-opec","tag-putin","tag-qatar","tag-rosneft","tag-roudi","tag-russia","tag-saudi","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/1377","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1377"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/1377\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/1378"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1377"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1377"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1377"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}