As the U.S. earnings season approaches its mid-point, 46% of S&P 500 companies have released their first-quarter reports, with 77% reporting earnings and 60% reporting revenues exceeding expectations. However, due to the decline in oil and gas prices, the first-quarter financial performance of the energy sector lags behind the market, with mixed results from major oil companies.
Looking ahead to the current second quarter, will the performance of major U.S. oil company stocks improve or worsen?
Specifically, in the first quarter, the energy sector saw a 25.5% year-on-year decline in earnings, the second largest decrease among 11 sectors, and a 3.5% revenue decline, the third largest decrease. Breaking it down into 5 sub-industries, 4 reported a year-on-year decline in earnings: Oil & Gas Refining & Marketing (-61%), Integrated Oil & Gas (-27%), Oil & Gas Exploration & Production (-9%), and Oil & Gas Storage & Transportation (-3%). In contrast, earnings in the Oil & Gas Equipment & Services surged by 19%.
In terms of individual stocks:
Exxon Mobil (NYSE: XOM) reported first-quarter non-GAAP earnings per share of $2.06, below Wall Street’s expectations. Revenue decreased by 4.0% year-on-year to $83.08 billion, but exceeded market expectations. The company remains a cash cow, with operating cash flow and free cash flow in the first quarter reaching $14.7 billion and $10.1 billion, respectively. Exxon announced a $3.8 billion dividend and a $3 billion stock buyback program for the quarter. Production-wise, the Guyana project’s quarterly total production exceeded 600,000 barrels of oil equivalent per day, with the company’s net production in the first quarter reaching 3.8 million barrels of oil equivalent.
Chevron (NYSE: CVX) also reported mixed results for the quarter, with non-GAAP earnings surpassing expectations while revenue fell year-on-year and missed estimates. Total profit decreased by 16% to $5.5 billion year-on-year. Chevron distributed a $3 billion dividend and repurchased nearly $3 billion in stocks for the quarter. The company reported a 12% year-on-year increase in global production, with U.S. petroleum net production growing by 35% to 406,000 barrels per day.
Meanwhile, Hess Corp (NYSE: HES) reported first-quarter GAAP earnings of $3.16 per share, exceeding expectations, with revenue growing 35.1% year-on-year and surpassing estimates. The company’s net production of oil and gas increased by 27% year-on-year to 476,000 barrels of oil equivalent per day, with net production in Guyana growing by 70% to 190,000 barrels. Additionally, the development of Whiptail is expected to add 250,000 barrels per day in total capacity for the company by 2027.
Despite the less-than-ideal financial performance of major U.S. oil companies in the first quarter, with the recovery of oil and gas prices during the current quarter, companies are expected to see a rebound in performance. According to FactSet forecasts, second-quarter earnings for oil and gas companies are estimated to increase by 15.7%, ranking third among S&P 500 sectors, while revenue is expected to grow by 4.0%, ranking sixth.
Looking towards 2025, earnings in the energy sector are projected to increase by 8.2%, with revenue growing by 1.2%.
