Wednesday, 7 August, 2024 / Edition 19

Fear of a worldwide recession has hit the global markets over the past few days, fueled primarily by concerning U.S. employment data and lower than expected U.S. economic growth. This has led to a significant decrease in the price of crude. Over the past month, WTI dropped more than $10/barrel from $83.88/barrel on 3 July to $73.52/barrel last Friday. Hopefully, oil prices and the financial markets will soon recover and stabilize.

Now, let’s get to more energy news from the past week.

Shangyou Nie

Editor, Well Read

Exxon, Chevron, Shell, and BP Announce Q2 and 1H Earnings

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Majors continued to report 1H and Q2 2024 results last week, following earnings announcements from European IOCs. ExxonMobil, Shell, and BP announced strong earnings despite lower margins in downstream businesses. Chevron’s results came in below market expectations.

ExxonMobil highlights:

• ExxonMobil set a quarterly production record at 4.4 million boed, an increase of 15 percent over Q1, thanks to the 782,000 boed added from Exxon’s acquisition of Pioneer Natural Resources.

• ExxonMobil’s production is now 68 percent oil and 32 percent gas, as the company recently increased its oil weighting.

• Q2 earnings were $9.2 billion, and 1H earnings came in at $17.5 billion.

• Full-year 2024 capex is projected to reach $28 billion, including the 8 months of capital spend from Pioneer operations.

• ExxonMobil CEO Darren Woods told analysts that ExxonMobil has met its goal of divesting $15 billion in upstream assets since 2019. No significant upstream divestments are expected in the near future.

The not-so-good news: Golden Pass LNG—the 30:70 Exxon and QatarEnergy joint project—will not see first production until late 2025, six months later than planned. The delay is due to the bankruptcy of lead contractor Zachry Holdings.

Shell highlights:

• Shell reported a net profit of $10.9 billion in 1H and $3.5 billion in Q2, beating market expectations.

• Upstream production reached 2.8 million boed in 1H, with 52 percent oil and 48 percent gas.

• Shell outbid a rival offer from Aramco to acquire Pavilion Energy in Singapore, expanding its LNG portfolio.

• It also took FIDs in Atapu-2 (Brazil) and Ruwais LNG (UAE) in Q2. These two projects are expected to contribute to a new production of 500,000 boed by 2025.

• Shell announced $3.5 billion in stock buybacks for Q3, its eleventh consecutive quarter with more than $3 billion of buybacks.

The not-so-good-news: Shell paused construction of a major Dutch biofuels plant (FID in 2021). This left a $1.5 billion impairment for the biofuels project and downstream sales.

BP highlights:

• BP made $2.8 billion in Q2 and $5.5 billion during 1H 2024.

• Upstream production reached 1.5 million boed, with 72 percent oil and 28 percent gas.

• BP took FID on its fully owned Kaskida oil field. This is BP’s first production from the Paleogene play in the deepwater of the Gulf of Mexico. Kaskida will cost $5 billion to develop and is expected to come on stream in 2029 with 80,000 boed.

• BP CEO Murray Auchincloss said during the analysts call that “We will probably hit peak production for liquids in the Permian around 2027.”

• BP announced that it will buy back $1.75 billion in shares during Q3. It plans to do $14 billion in buybacks over 2024 and 2025.

The not-so-good news: BP decided to pause two bio-refinery projects in Lingen, Germany and Washington State.

Chevron highlights:

• Chevron made $4.4 billion in Q2 and $9.9 billion in 1H 2024.

• Chevron Q2 results were 27 percent lower QoQ, and below analysts’ expectations, mainly due to lower margins from downstream business lines.

• Chevron produced 3.3 million boed with 59 percent oil and 41 percent gas.

• The company added exploration acreage in Namibia, Brazil, Equatorial Guinea, and Angola.

• Chevron bought back $3 billion shares in Q2.

The not-so-good news: Chevron’s stock has recently underperformed compared to its peers, down 9.5 percent over the past 12 months and 3.2 percent YTD.

Chevron also announced another important decision…

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Chevron Moves HQ from California to Texas

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Chevron announced last Friday that it will move its headquarters from San Ramon, California to Houston, Texas. This is the latest example of energy companies concentrating their operations in Houston, following Exxon’s relocation to neighboring Spring, Texas in 2023.

Relocation details:

• Chevron Board Chairman, CEO Mike Wirth, and Vice Chairman Mark Nelson will relocate to Houston before the end of 2024.

• All corporate functions will move over the next five years. Chevron already employs 7,000 people in Houston.

• Chevron is reviewing which of its remaining 2,000 positions will stay in San Ramon to support its California operations.

Why Chevron decided to move:

• According to the Houston Chronicle, Chevron said “Texas offers a business-friendly environment, a more affordable cost of living, and better proximity to key counterparts in the service sector, our industry, and academia.”

• Chevron further stated: “We believe (California) state policymakers have pursued policies that raise costs and consumer prices, creating a hardship for all Californians.” California has an 8.8 percent corporate income tax.

• Chevron and the State of California have engaged in a number of legal battles in recent years.

• Alex Stack, a spokesperson for California governor Gavin Newsom said, “This announcement is the logical culmination of a long process that has repeatedly been foreshadowed by Chevron,” and “We’re proud of California’s place as the leading creator of clean energy jobs.”

• Analysts also cited the talent pool in Houston as a factor.

• According to the Houston Chronicle, Texas has 53 Fortune 500 companies headquartered in the state compared to 56 in California.

What to watch:

• Employment opportunities in supporting functions in addition to petroleum geologists and engineers will become available as a result of the move.

• Will other majors/independent and service companies continue their migration to Houston?

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✉️ To get in touch with Shangyou, send an email to editorial@aapg.org.