Big losses reported in 4Q 2015 on writedowns, low oil prices
Conglin Xu
Senior Editor-Economics
Laura Bell
Statistics Editor
Weighed by lower commodity prices and asset impairments, a sample of 59 US-based oil and gas producers and refiners posted combined net losses of $39.98 billion in fourth-quarter 2015 compared with earnings of $9.56 billion in the same quarter a year earlier. The group's collective net losses for the 12 months ended Dec. 31, 2015, were $102.86 billion compared with net income of $86.46 billion in 2014. Revenues decreased 36% for the fourth quarter and full year, year-over-year, respectively.
Meantime, a sample of 10 oil and gas producers and pipeline companies based in Canada posted a combined net loss of $7.5 billion (Can.) in fourth-quarter 2015 compared with a net loss of $2.24 billion (Can.) in the same quarter a year earlier. On a full-year basis, the group reported a net loss of $16.09 billion (Can.) compared with earnings of $19.88 billion (Can.) in 2014.
During fourth-quarter 2015, the average West Texas Intermediate and Brent spot prices decreased to $41.95/bbl and $43.57/bbl, respectively, from $73.16/bbl and $76.40/bbl for fourth-quarter 2014. On a full-year basis, WTI and Brent prices averaged a respective $48.66/bbl and $52.32/bbl in 2015 vs. $93.17/bbl and $98.97/bbl, respectively, in 2014.
For fourth-quarter 2015, US crude oil production averaged 9.31 million b/d, up from 9.25 million b/d for fourth-quarter 2014 but down from 9.43 million b/d for third-quarter 2015.
Front-month natural gas futures trading on the New York Mercantile Exchange averaged $2.23/MMbtu in fourth-quarter 2015 compared with $3.85/MMbtu in the same quarter a year earlier, while US gas marketed production climbed to 7,271 bcf for the quarter, up from 7,139 bcf a year earlier.
Quarterly refining margins increased for the US Gulf and West coasts from a year ago, but deceased for the East Coast and Midwest. According to Muse, Stancil & Co, cash margins in fourth-quarter 2015 averaged $14.06/bbl for Midwest refiners, $19.07/bbl for West Coast refiners, $8.47/bbl for Gulf Coast refiners, and $2.46/bbl for East Coast refiners. In the same quarter of the prior year, these refining margins were $17.98/bbl, $12.93/bbl, $6.12/bbl, and $5.08/bbl, respectively.
For the full-year 2015, cash refining margins increased in most regions, averaging $17.58/bbl for the Midwest, $22.42/bbl for the West Coast, $11.27/bbl for the Gulf Coast, and $5.52/bbl for the East Coast compared with, respectively, $19.43/bbl, $15.04/bbl, $8.50/bbl, and $3.99/bbl during the prior year.
US oil and gas producers
ExxonMobil Corp. announced estimated 2015 earnings of $16.55 billion compared with $33.62 billion a year earlier, as higher downstream and chemical earnings were offset by sharply lower commodity prices in upstream.
The company's fourth-quarter 2015 earnings were $2.78 billion, down from earnings of $6.57 billion in fourth-quarter 2014. Upstream earnings of $857 million were down $4.6 billion from fourth-quarter 2014. The firm's oil-equivalent production increased 4.8% from fourth-quarter 2014, with liquids up 14% and natural gas down 5.6%.
ExxonMobil's downstream earnings for fourth-quarter 2015 were $1.4 billion, up $854 million from the same quarter a year ago, because of stronger margins and favorable volumes. Chemical earnings of $963 million were $264 million lower than fourth-quarter 2014 due to lower margins.
Chevron Corp. reported a net loss of $555 million fourth-quarter 2015 compared with earnings of $3.47 billion in the same quarter in 2014. Full-year 2015 earnings for the firm were $4.71 billion compared with $19.31 billion in 2014.
Chevron's worldwide net oil-equivalent production was 2.67 million b/d in fourth-quarter 2015, up from 2.58 million b/d in fourth-quarter 2014. Net oil-equivalent production for full-year 2015 was 2.62 million b/d, up 2% from the previous year.
In the US, Chevron's upstream operations incurred a loss of $1.95 billion in fourth-quarter 2015 compared with earnings of $432 million in the same year-ago quarter. This loss was due to lower oil prices, higher depreciation and exploration expenses, and lower gains on asset sales, which were offset, at least partly, by higher oil production. The increase in depreciation and exploration expenses was related to impairments and project cancellations. The company's international upstream operations earned $593 million in fourth-quarter 2015 compared with $2.24 billion in the same quarter a year earlier.
On the downstream side, Chevron's US operations earned $496 million in fourth-quarter 2015 compared with earnings of $889 million a year earlier, mainly due to the absence of 2014 gains on asset sales. This total was partly offset by higher margins compared with the same year-ago period. International downstream operations earned $515 million in fourth-quarter 2015 compared with $629 million a year earlier.
ConocoPhillips reported a fourth-quarter 2015 net loss of $3.43 billion compared with a net loss of $24 million in the same quarter in 2014. Special items for the quarter resulted in aftertax impacts of $2.3 billion, including $2.7 billion of noncash impairments primarily from price-related impacts at Australia Pacific LNG (APLNG) and various assets in the UK, as well as changes to future exploration plans in Alaska's Chukchi Sea, Angola, and the Gulf of Mexico, partially offset by $366 million from net gains on asset sales.
During the quarter, ConocoPhillips's dry hole expense of $565 million-or $506 million excluding special items-was incurred primarily in Canada and the Gulf of Mexico. During full-year 2015, the company recorded a net loss of $4.37 billion compared with full-year 2014 earnings of $6.94 billion.
Devon Energy Corp. reported a fourth-quarter 2015 net loss of $4.53 billion because of noncash asset impairment charges of $5.34 billion. For the full year, asset impairments totaled $20.82 billion.
Linn Energy LLC recorded a net loss of $2.47 billion for the quarter compared with a net loss of $154.5 million a year earlier.
Refiners
Valero Energy Corp. reported net income of $395 million for fourth-quarter 2015 compared with $1.22 billion for the same quarter in 2014. For the year ended Dec. 31, 2015, the company's net income was $4.1 billion vs. $3.71 billion for 2014. The refining segment reported adjusted operating income for fourth-quarter 2015 of $1.5 billion, which was in line with the $1.5 billion reported in fourth-quarter 2014. Fourth quarter 2015 refining throughput volumes averaged 2.9 million b/d, an increase of 34,000 b/d from fourth-quarter 2014. Valero's refineries operated at 97% throughput capacity utilization in fourth-quarter 2015.
Marathon Petroleum Corp. reported earnings of $168 million for the last 3 months of 2015 compared with $805 million in the same year-ago quarter. The company's refining and marketing segment's operations earned $207 million in 2015's final quarter and $4.19 billion for full-year 2015. This compares with earnings of $1.02 billion and $3.61 billion in the last quarter and full-year of 2014. The decrease in quarter-over-quarter results was primarily due to the effects of the $345-million lower of cost or market (LCM) charge and a last-in, first-out (LIFO) inventory accounting charge. In addition, segment results were negatively impacted by the effect of lower overall commodity prices on volumetric gains and unfavorable crude oil and feedstock acquisition costs relative to benchmark Light Louisianan Sweet (LLS) crude oil.
Phillips 66 announced 2015 fourth quarter earnings of $666 million compared with fourth-quarter 2014 earnings of $1.15 billion. Refining earnings were $376 million during the quarter compared with earnings of $1.05 billion during third-quarter 2015. The decrease was primarily driven by lower realized margins because of a 35% decline in global market cracks compared with those in the third quarter. Meanwhile, distillate cracks declined from $15.67/bbl to $12.86/bbl for the same period.
HollyFrontier Corp. announced a fourth-quarter 2015 net loss of $43.9 million compared with a net loss of $222.2 million for the quarter ended Dec. 31, 2014. Included in the quarter results was a noncash inventory valuation charge that decreased aftertax earnings by $88 million.
Canadian firms
All financial figures in this section are presented in Canadian dollars unless otherwise noted.
Suncor Energy Inc. reported a fourth-quarter 2015 net loss of $2 billion compared with net earnings of $84 million in the same year-ago quarter. The loss for fourth-quarter 2015 was because of $1.59 billion of noncash impairment charges, reflecting lower crude oil prices, and a foreign exchange loss of $382 million on US dollar denominated debt.
Suncor Inc.'s total upstream production rose to 582,900 boe/d in fourth-quarter 2015 compared with 557,600 boe/d in the same quarter a year ago. This was because of strong reliability in the company's oil sands operations, which increased in fourth-quarter 2015 to 439,700 b/d, up from 384,200 b/d in the prior year's quarter. The increase from oil sands was primarily because of record in-situ production and reliable operations across all assets following the completion of planned maintenance early in the quarter. Cash operating costs per barrel for oil sands operations decreased in fourth-quarter 2015 to $28/bbl compared with $34.45/bbl in the same year-ago quarter.
During fourth-quarter 2015, Suncor completed planned maintenance at its Montreal refinery. The company's average refinery utilization decreased to 93% in the fourth quarter compared with 95% in the same year-ago quarter. This was primarily driven by unplanned maintenance at the Edmonton refinery and lower distillate demand in Western Canada.
Imperial Oil Ltd.'s fourth-quarter 2015 earnings were $102 million, which was down from $671 million in fourth-quarter 2014. Imperial's upstream business recorded a net loss of $289 million in fourth-quarter 2015 compared with a net income of $218 million in the same quarter in 2014. Production averaged 400,000 boe/d, an increase of 27% from the same period of 2014 and hitting the highest level in more than 2 decades.
Imperial's downstream net income was $352 million in fourth-quarter 2015 compared with a net income of $397 million in the same quarter in 2014. Earnings decreased mainly because of lower refinery margins of about $300 million, which was partially offset by the favorable impact of a weaker Canadian dollar, higher marketing margins, and lower refining maintenance costs.
The company's net income from its chemicals segment in the fourth quarter reached $74 million, up from $63 million in the same quarter in 2014.
TransCanada Corp. announced a fourth-quarter 2015 net loss of $2.46 billion, which included a $2.9-billion aftertax impairment charge related to Keystone XL. This compared with a net income of $458 million for the same period in 2014. For all of 2015, the company had a net loss of $1.24 billion compared with a net income of $1.74 billion in 2014.
Enbridge Inc., another leading pipeline operator, reported fourth-quarter earnings of $452 million and annual earnings for 2015 of $251 million. This compares with earnings of $159 million and $1.4 billion, respectively, over the same periods in the prior year.
