Analysts will sort through a series of energy sector earnings reports this week to see how the recent drop in oil prices is affecting margins at Chevron Corporation, the second-largest oil company in the U.S., along with Valero Energy Corporation, ConocoPhillips and Phillips 66. Royal Dutch Shell, the biggest oil company in Europe, also is slated to post results later this week.
Global oil prices have plunged more than 40 percent after Brent crude prices peaked at $115 a barrel in June to drop below $45 a barrel in January, its lowest since March 2009.
S&P 500 companies are forecast to post fourth-quarter growth of 5 percent, as the energy sector is projected to be the biggest laggard, with an expected drop of 19.4 percent. Other sectors have benefited from lower oil prices, such as consumer discretionary companies in retail and apparel, as the drop in gasoline prices are expected to help boost U.S. consumer spending.
However, the energy sector will weigh heavily on overall growth for the quarter. If the energy sector is removed from overall growth projections in the fourth quarter, the 5 percent growth rate “would shoot up to 8.8 percent,” research firm Estimize said in a research note Friday.
“The big thing that we’re look at with energy companies is what are they going to report on for capital expenditures, where are they headed and how aggressively are they going to cut capital spending and projects, which are out there, but may not be profitable because oil prices have fallen so much,” Jeff Kravetz, regional investment director at U.S. Bank Wealth Management, said.
Here’s a deeper look at the energy companies reporting this week.
Royal Dutch Shell
Royal Dutch Shell Plc (LON:RDSA), Europe's largest oil company by market value, will post quarterly results before the financial markets open Thursday.
The United Kingdom-based company beat third-quarter expectations in October, as its upstream and downstream divisions delivered strong results. However, Royal Dutch Shell’s third-quarter earnings in 2014 dropped from the second quarter after declining oil prices weighed on oil production.
Wall Street expects Royal Dutch Shell to report fiscal fourth-quarter net income of $4.90 billion, or earnings per share of 83 cents, on revenue of $90.45 billion, according to analysts polled by Thomson Reuters. That compares with a profit of $2.91 billion, or earnings per share of 28 cents, on revenue of $109.24 billion a year ago.
Following the decline in oil prices over the last six months, shares of Royal Dutch Shell have dropped 3.01 percent to average $28.60.
Valero Energy Corporation
Ahead of the opening bell Thursday, petroleum refining company Valero Energy Corporation (NYSE:VLO) will issue results. The company’s quarterly profit more than tripled in the third quarter to $1.06 billion from $312 million a year earlier, driven by strength in its refining division.
Valero Energy Corp.’s ethanol segment posted strong results in the previous quarter after its operating income soared just over 75 percent to $198 million, driven by a drop in corn expenses and a jump in volumes.
Analysts expect Valero Energy Corp. to turn in fiscal fourth-quarter net income of $626.13 million, or earnings per share of $1.15, on revenue of $26.85 billion, compared with a profit of $963 million, or earnings per share of $2.38, on revenue of $34.43 billion a year ago.
During the last two quarters, shares of Valero Energy Corp. have increased 4.26 percent to $49.22.
Exploration and production company ConocoPhillips (NYSE:COP), which operates in Alaska, the U.S., Europe and Asia Pacific, is slated to issue earnings Thursday. The company’s earnings increased 9 percent in the third quarter after oil and gas production ramped up 33 percent in its Eagle Ford and Bakken Shale regions.
Analysts will be watching how much selling prices will drop in the fourth quarter after total realized prices fell 7 percent to $64.78 per barrel in the third quarter, signaling lower prices across all of the company’s products.
Fiscal fourth-quarter net income of $902.45 million, or earnings per share of 73 cents, on revenue of $13.05 billion, compared with a profit of $1.74 billion, or earnings per share of $2, on revenue of $13.99 billion a year ago.
Shares of ConocoPhillips have fallen 22.89 percent to $72.92 in the last six months.
Phillips 66 (NYSE:PSX), an energy manufacturing and logistics company, also will post earnings Thursday. The company was previously a refining segment within ConocoPhillips, but was spun off as a separate publicly traded company in 2012.
After Phillips 66’s earnings more than doubled in the third quarter as its refining business tuned a profit, analysts will be eyeing the company’s fourth-quarter report to see if refiners continue to buy cheap crude oil, which will help boost the company’s profits.
Fiscal fourth-quarter net income of $809.11 million, or earnings per share of $1.40, on revenue of $32.98 billion, compared with a profit of $808 million, or earnings per share of $1.37, on revenue of $43.84 billion.
In the last six months, shares of Phillips 66 have dropped 17.46 percent $76.54.
U.S. multinational energy company Chevron Corporation (NYSE:CVX) will report earnings before the financial markets open Friday. The company’s profit jumped 13 percent in the third quarter after lower crude oil prices helped boost its refinery operations.
Analysts will be watching the company’s production figures after Chevron Corp., the second-largest oil company in the U.S., saw production fall around 1 percent in the third quarter to 2.57 million barrels of oil equivalent per day.
Fiscal fourth-quarter net income of $3.55 billion, or earnings per share of $1.77, on revenue of $30.65 billion, compared with a profit of $4.93 billion, or earnings per share of $2.57, on revenue of $56.16 a year ago.
Shares of Chevron Corp. have dropped 18.37 percent to average $117.42 during the last two quarters.