Second-quarter 2022 earnings surge on high commodity prices

Commodity prices continued to climb to new highs during second-quarter 2022, driven by a tight supply-demand balance for oil, natural gas, and refined products. A group of 49 US-based oil and gas producers and refiners recorded a collective net income of $77.1 billion for second-quarter 2022, compared with earnings of $16.9 billion in second-quarter 2021. Total revenues were $787 billion for the quarter, compared with $443.1 billion a year ago.

Brent crude oil prices averaged $113.54/bbl in second-quarter 2022, compared with $68.83/bbl in the previous year’s second quarter. West Texas Intermediate (WTI) averaged $108.72/bbl in this year’s second quarter, compared with $66.09/bbl in second-quarter 2021.

US crude oil production in the second quarter averaged 11.76 million b/d, compared with 11.28 million b/d for the same quarter a year ago, according to the US Energy Information Administration (EIA). Natural gas liquids (NGL) production averaged 5.87 million b/d during the quarter, compared with 5.46 million b/d in second-quarter 2021.

According to Baker Hughes, the number of active oil rigs in the US ramped up to 594 at the end of June from 531 at the end of March. This also compared with 372 rigs at the end of June 2021.

US commercial crude oil stock at the end of June was 423 million bbl, compared with 447 million bbl to end second-quarter 2021, and a 5-year average of 471.6 million bbl.

US oil product stock at the end of June was 757 million bbl, compared with 823 million bbl at the end of for the same quarter a year ago and a 5-year average of 841.0 million bbl.

US Strategic Petroleum Reserve (SPR) at the end of June was 492 million bbl, compared with 621 million bbl to end June 2021, and a 5-year average of 652.0 million bbl.

US refinery inputs were 16.53 million b/d in second-quarter 2022, compared with 16.17 million b/d a year earlier, and 16.06 million b/d for the previous quarter. Refinery utilization rate was 92.1% for the quarter, compared with 89.2% a year earlier, and 89.5% in first-quarter 2022.

According to Muse, Stancil & Co., refining cash margins in this year’s second quarter averaged $42.89/bbl for Middle-West refiners, $37.11/bbl for West Coast refiners, $38.77/bbl for Gulf Coast refiners, and $35.16/bbl for East Coast refiners. In the same quarter in 2021, these refining margins were $17.4/bbl, $14.36/bbl, $8.45/bbl, and $7.12/bbl, respectively.

Natural gas prices at Henry Hub averaged 7.48/MMbtu in second-quarter 2022, compared with 2.94/MMbtu a year earlier. US marketed gas production grew to 103.831 bcfd from 101.123 bcfd for the same quarter a year ago, according to EIA.

US LNG exports averaged 10.93 bcfd during the quarter, compared with 9.81 bcfd in the previous quarter.

The number of active gas rigs in the US rose to 157 at the end of June from 137 at the end of March. This also compared to 98 rigs at the end of June 2021.

A sample of 14 oil and gas producers and pipeline companies with headquarters in Canada posted total net income of $15.86 billion (Canadian dollar) in second-quarter 2022, compared with net earnings of $9.15 billion in the prior year’s quarter.

US oil, gas producers

ExxonMobil Corp. estimated second-quarter 2022 earnings of $17.9 billion, compared with $5 billion in first-quarter 2022. Excluding identified items, earnings of $17.6 billion increased $8.7 billion from the prior quarter which have increased both natural gas realizations and refining margins well above the 10-year range, the company said.

Second-quarter results also included a favorable identified item of nearly $300 million associated with the sale of Barnett shale upstream assets. Capital and exploration expenditures were $4.6 billion in the second quarter and $9.5 billion for first-half 2022.

Excluding identified items, upstream earnings in second-quarter 2022 were $11.1 billion, an increase of $3.3 billion from the previous quarter. Crude realizations improved 15% and gas realizations increased 23% compared to the first quarter driven by tight supply. Higher production from growth projects and recovery from first quarter weather-related downtime in Canada were partly offset by price entitlement effects and increased seasonal scheduled maintenance.

The Permian basin continued to improve efficiency and grow volumes, with average production during the quarter of more than 550,000 boe/d. The company expects to achieve a 25% production increase this year versus full-year 2021 and to eliminate routine flaring in the Permian basin by yearend.

Offshore Guyana production capacity increased to more than 340,000 boe/d with Liza Phase 2 production start-up earlier this year and Liza Phase 1 producing above design capacity. In addition, two new discoveries were announced (OGJ Online, July 26, 2022). The company also reached an agreement to supply the country of Guyana with natural gas to significantly reduce domestic energy costs and provide opportunities for industrial growth.

Chevron reported earnings of $11.6 billion for second-quarter 2022, compared with $3.1 billion in second-quarter 2021. Adjusted earnings of $11.4 billion in second-quarter 2022 compared with adjusted earnings of $3.3 billion in second-quarter 2021.

Worldwide net oil-equivalent production was 2.9 million b/d in second-quarter 2022. International production decreased 13% primarily due to the end of concessions in Thailand and Indonesia, while US production increased 3% compared to the same period a year ago mainly in the Permian basin.

US downstream operations reported earnings of $2.44 billion in this year’s second quarter, compared with earnings of $776 million a year earlier. The increase was mainly due to higher margins on refined product sales, partially offset by lower earnings from the 50%-owned Chevron Phillips Chemical Co. and higher operating expenses.

International downstream operations reported earnings of $1.08 billion in second-quarter 2022, compared with $63 million a year earlier. The increase was mainly due to higher margins on refined product sales and a $144 million favorable swing in foreign currency impacts between periods.

ConocoPhillips reported second-quarter 2022 earnings of $5.1 billion, compared with second-quarter 2021 earnings of $2.1 billion. Excluding special items, second-quarter 2022 adjusted earnings were $5.1 billion, compared with second-quarter 2021 adjusted earnings of $1.7 billion. Special items for the current quarter were comprised of gains on asset sales including contingent payments related to prior dispositions, partially offset by a loss on debt extinguishment, and a Norway tax reform-related adjustment.

Earnings and adjusted earnings increased from second-quarter 2021 primarily due to higher realized prices. The company’s total average realized price was $88.57/boe, 77% higher than the $50.03/boe realized in second-quarter 2021, as production remains unhedged and thus realizes the full impact of changes in marker prices.

ConocoPhillips also announced a $5-billion increase in planned 2022 return of capital to shareholders to a total of $15 billion. The company declared both a third-quarter ordinary dividend of 46¢/share and a fourth-quarter variable return of cash payment of $1.40/share.

Production for second-quarter 2022 was 1.69 MMboe/d, an increase of 104,000 boe/d from the same period a year ago. After adjusting for closed acquisitions and dispositions and the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis, second-quarter 2022 production decreased by 69,000 boe/d (4%) from the same period a year ago.

Occidental Petroleum announced net income for second-quarter 2022 of $3.6 billion, and adjusted income attributable to common stockholders of $3.2 billion. Net income for first-quarter 2022 was $4.7 billion and adjusted income was $2.1 billion. Second-quarter after-tax items affecting comparability of $315 million included $174 million of derivative gains and $140 million of gains on early debt extinguishment.

The company’s total average global production of 1.15 MMboe/d for this year’s second quarter was within the mid-point of guidance. Permian, Rockies, and International came within guidance, with average production of 493,000 boe/d, 279,000 boe/d, and 228,000 boe/d, respectively. Gulf of Mexico average production of 147,000 boe/d exceeded the high-end of guidance. 

Continental Resources Inc. had second-quarter 2022 net income of $1.21 billion. In the quarter, typically excluded items in aggregate represented $42.8 million of Continental’s reported net income. Adjusted net income for the second quarter was $1.25 billion. Net cash provided by operating activities for the quarter was $1.74 billion. Capital expenditure came in at about $650 million. Total production for the quarter averaged 400,200 boe/d. Second-quarter 2022 oil production averaged 198,300 b/d. Production in the Bakken fell about 5% quarter-over-quarter but was offset with growth in the Denver-Julesburg basin (up 12% quarter-over-quarter) and Powder River basin (up 134% quarter-over-quarter).

US independent refiners

Marathon Petroleum Corp. reported net income of $5.9 billion for second-quarter 2022, compared with net income of $8.5 billion for second-quarter 2021. Adjusted net income was $5.7 billion for second-quarter 2022. This compares with adjusted net income of $437 million for second-quarter 2021. Adjusted results for these periods exclude net pre-tax benefits of $238 million and $11.6 billion for the second-quarter 2022 and second-quarter 2021, respectively.

Segment adjusted EBITDA for refining and marketing (R&M) was $7.8 billion in second-quarter 2022, versus $751 million for second-quarter 2021. Segment adjusted EBITDA excludes refining planned turnaround costs, which totaled $151 million in this year’s second quarter and $61 million in second-quarter 2021. The increase in segment adjusted EBITDA was driven by higher margins and throughput in all regions.

R&M margin was $37.54/bbl for second-quarter 2022, versus $12.45/bbl for second-quarter 2021. Crude capacity utilization was near 100%, resulting in total throughput of 3.1 million b/d for second-quarter 2022. In second-quarter 2021, crude capacity utilization was about 94%, which resulted in total throughput of 2.9 million b/d.

Phillips 66 announced second-quarter 2022 earnings of $3.2 billion, compared with earnings of $582 million in first-quarter 2022. Excluding special items of $118 million, the company had adjusted earnings of $3.3 billion in the second quarter, compared with first quarter adjusted earnings of $595 million.

Refining second-quarter 2022 pre-tax income was $3 billion, compared with pre-tax income of $123 million in first-quarter 2022. Refining results in the first quarter included $17 million of hurricane-related maintenance and repair costs. Refining results in the second quarter included $70 million of costs related to the finalization of RIN obligations for prior year compliance periods and $26 million of costs related to the conversion of the Alliance refinery to a terminal.

Adjusted pre-tax income for refining was $3.1 billion in the second quarter, compared with adjusted pre-tax income of $140 million in the first quarter. The improvement was primarily due to higher realized margins driven by market crack spreads. The composite global market crack increased to $46.72/bbl, up from $21.93/bbl in the first quarter. Realized margins were $28.31/bbl in the second quarter, up from $10.55/bbl in the first quarter.

Pre-tax turnaround costs for the second quarter were $223 million, compared with first-quarter costs of $102 million. Crude utilization rate was 90% and clean product yield was 83% in the second quarter.

Valero Energy Corp. reported net income attributable to Valero stockholders of $4.7 billion for second-quarter 2022, compared with $162 million for second-quarter 2021. Excluding the adjustments shown in the accompanying earnings release tables, adjusted net income attributable to Valero stockholders was $4.6 billion for second-quarter 2022, compared with $260 million for second-quarter 2021.

The refining segment reported operating income of $6.2 billion for second-quarter 2022, compared with $349 million for second-quarter 2021. Adjusted operating income was $6.1 billion for second-quarter 2022, compared with $442 million for second-quarter 2021. Refining throughput volumes averaged 3.0 million b/d in this year’s second quarter, which was 127,000 b/d higher than second-quarter 2021.

Canadian companies

Suncor’s net earnings increased to nearly $4 billion in second-quarter 2022, compared with $868 million in the prior year quarter.

Suncor’s oil sands production delivered record adjusted funds from operations of $4.23 billion in second-quarter 2022, compared with $1.84 billion in the prior year quarter, driven by significantly higher price realizations.

Production from the company’s oil sands assets increased to 641,500 b/d in second-quarter 2022, compared with 615,700 b/d in the prior year quarter, due to increased production at Syncrude and Fort Hills in the current period, partially offset by the impact of maintenance activities at oil sands operations, including the largest turnaround in Firebag history, which was completed after the quarter.

Suncor’s Refining and Marketing (R&M) generated record adjusted funds from operations of $2.13 billion in second-quarter 2022, compared with $677 million in the prior year quarter. In the second quarter, Suncor’s refinery utilization averaged 84% and crude throughput was 389,300 b/d, compared with 70% and 325,300 b/d, respectively, in the prior year quarter. Solid utilizations in the current quarter outside of planned turnaround activities allowed the company to capture significant benchmark crack spreads and refining margins. Following the completion of planned turnaround activities, the company’s refineries exited the quarter with an average refinery utilization of over 100%.

Imperial Oil reported quarterly net income of $2.4 billion and cash flow from operating activities of $2.68 billion. Upstream production of 413,000 gross boe/d was the highest second quarter production in over 30 years. Sustained strong downstream operating performance with quarterly refinery capacity utilization of 96% resulted in the fourth consecutive quarter above 90%.

Canadian Natural Resources reported net earnings of $3.5 billion and adjusted net earnings from operations of $3.8 billion during second-quarter 2022. The company’s North America E&P liquids production, excluding thermal in situ, averaged 227,540 b/d in second-quarter 2022, up 2% and 4% over first-quarter 2022 and second-quarter 2021 levels, respectively. The increase over first-quarter 2021 primarily reflects strong drilling results, partially offset by natural field declines. The increase over second-quarter 2021 primarily reflects strong drilling results as well as acquisitions, partially offset by natural field declines.