Multinationals face tougher times as earnings slump

It is definitely not the best of time for the oil and gas multinationals, as the impact of the dwindling crude oil prices weighs on their financial reports.

Earnings of the oil giants have nosedived in the past year, but the latest results gathered by The Guardian presented worse result than expected.

The oil majors that have released their report include; Chevron, ExxonMobil, Shell, British Gas (BG), ENI, among others.

Chevron announced a 90 per cent drop in earnings in the second quarter. It went from bringing in $5.7 billion in the second quarter of 2014 to hauling in a mere $571 million this year.

Exxon Mobil raked in $8.8 billion in profits for the second quarter of 2014. This year, it earned less than half of that amount $4.2 billion.

Oil prices have plummeted from over $100 a barrel last year to about $53 now. Specifically, the prices have plunged nearly 20 per cent this month

Chevron Corporation reported earnings of $571 million for second quarter 2015, compared with earnings of $5.7 billion the 2014 second quarter.

Included in the quarter were impairments of $1.96 billion and other charges of approximately $670 million relating to project suspensions and adverse tax effects, all of which were non-cash charges stemming from a downward revision in the company’s longer-term crude oil price outlook.

Partially offsetting were gains on asset sales totaling $1.80 billion in the current quarter. Foreign currency effects decreased earnings in the 2015 quarter by $251 million, compared with a decrease of $232 million a year earlier.

However, the sharp fall in the crude oil price sent second-quarter earnings at ExxonMobil tumbling 52 per cent despite increased oil production and significantly improved results in its downstream operations.

The sharp earning declines were in spite of a 3.6 per cent increase in production against last year’s second quarter. Production of liquids such as crude oil and natural gas liquids rose 8.9 per cent to 2.3 million barrels a day, while natural gas production declined 3.6 per cent to 10.1billion cubic feet a day. The company cut upstream capital and exploration expenditure 20 per cent to $6.75 billion.
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Chief Executive, ExxonMobil, Rex Tillerson, said: “Our quarterly results reflect the disparate impacts of the current commodity price environment, but also demonstrate the strength of our sound operations, superior project execution capabilities as well as continued discipline in capital and expense management,”

Meanwhile, Royal Dutch Shell has announced plans to cut about 6,500 jobs across the board.

Shell’s earnings slumped from last year, down 37 per cent to $3.8 billion (£2.44 billion). Revenue for the first half of the year is down from $220.9 billion (£141.66 billion) in 2014 to $138.1 billion (£88.56 billion) this year. Capital investment has been cut by a fifth, down $7 billion (£4.49 billion).

Shell’s Chief Executive, Ben van Beurden, said: “We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery. We’re taking a prudent approach, pulling on powerful financial levers to manage through this downturn, always making sure we have the capacity to pay attractive dividends for shareholders.”

BG Group revealed a $429 million (£273million) second-quarter profit, down from $1.2 billion a year earlier. This came despite a doubling of production in both Brazil and Australia, taking group output to its highest-ever level.

BG, formerly the exploration arm of British Gas, also revealed that it had cut costs by 34 per cent to $3.1bn in the first half of the year.

The Chief Executive, BG, Helge Lund, said: “Our costs are lower, our production is higher. This (the fall in profit) is more or less only driven by the lower oil price in the market,” adding that he was “not disappointed” with the result given the tough operating environment in the oil industry.