with Paulina Firozi
The numbers are in: We now know just how badly the country's top oil drillers were hit by the coronavirus-fueled downturn.
Three of the four biggest U.S. oil and gas producers posted multimillion to multibillion dollar losses in their latest earnings reports, a sign of just how damaging the drop in energy demand because of the covid-19 pandemic has been to the domestic oil business.
ConocoPhillips, the third-biggest U.S. oil driller by market capitalization, announced late last week that it lost $1.7 billion during the first three months of the year. Phillips 66, the fourth-largest, reported a first-quarter loss of $2.5 billion.
And ExxonMobil, long the nation's top energy company, bled $610 million during the first three months of 2020, when oil globally lost two-thirds of its value. It is the first time the company has posted a quarterly loss in the past three decades.
“We've certainly weathered the ups and downs of many price cycles,” its CEO Darren Woods said during an earnings call Friday. “However, I have to say, we've never seen anything like what the world is experiencing today.”
The U.S. oil majors operate around the world, but it's their Texas operations that will be taking a hit.
The companies will try to sustain their bottom lines by cutting production in the Permian Basin. The storied oil-rich region stretches through western Texas and southeastern New Mexico, and enjoyed a surge in production with the advent of hydraulic fracturing technology.
But now with the drop in the price of oil making Permian crude too expensive to get out of the ground, that boom is quickly turning into a bust.
Exxon said it expects to ramp down Permian rigs by about 75 percent and end the year with only about 15 rigs. Altogether, the company is slashing its capital spending for 2020 by 30 percent.
Chevron, the nation's No. 2 oil company, said it expects to cut 125,000 barrels per day from its original production target for the Permian by the end of the year. It began the year running 17 rigs in the Permian but now is running only five.
The company was alone among those top four to make a first-quarter profit, earning $3.6 billion in part off the strength of its refining division. “Our first quarter was a solid quarter, and I think the results reflect that,” Chevron CEO Mike Wirth said on Bloomberg TV.
But he warned: “Second quarter is a little bit tougher.”
And ConocoPhillips said it expects to cut production not just in the Permian, but across North America by about 460,000 barrels per day by June.
Overall, output from the top American and European oil majors is set to drop by nearly 11 percent next quarter, according to an analysis by Reuters. The European majors BP and Dutch Royal Shell saw declined profits to start 2020 too, with Shell slashing its dividend to shareholders for the first time since World War II.
While the oil giants are taking body blows, it's smaller U.S. oil companies that are most at risk.
Yet more mid-tier firms, heavily indebted to expand shale production when oil prices were high, are at risk of needing Chapter 11 protection if the price of oil remains low.
The Federal Reserve is preparing to throw a lifeline to distressed firms in the energy sector and elsewhere. But the American Petroleum Institute, which represents major oil companies in Washington, has stressed that it wants no special aid for the oil industry.
Some industry analysts say the bigger oil companies are ultimately aiming to gobbling up the assets of smaller firms that go belly-up.
“Ultimately what’s going to happen,” Boris Schlossberg, a managing director at BK Asset Management, said last month, “is you’re going to have massive consolidation; they’re going to be able to buy assets incredibly cheap.”
A cause for celebration
A team at The Washington Post was awarded the Pulitzer Prize for its series on global hot spots experiencing the devastating consequences of above-average warming.
How the series came to be: Chris Mooney “sparked The Post’s ‘2C’ project when he noticed a key detail in climate studies of Puerto Rico and the Mojave Desert: These locations were heating up much faster than the global average, to disastrous effect,” The Post’s Paul Farhi reports. “The studies suggested that rising temperatures are an uneven phenomena, affecting some parts of the world more than others …. By collecting and studying multiple sets of temperature data from around the world stretching back to the late 1800s (a task spearheaded by staffer John Muyskens), Post reporters found that roughly 10 percent of the planet has already warmed by at least 2 degrees Celsius, or 3.6 degrees Fahrenheit. Climate scientists have warned that a two-degree rise for the entire planet could result in cataclysmic conditions.”
Read every entry in the “2C: Beyond the Limit” series here:
- Extreme climate change has arrived in America
- Dangerous new hot zones are spreading around the world
- The climate chain reaction that threatens the heart of the Pacific
- On land, Australia’s rising heat is ‘apocalyptic.’ In the ocean, it’s worse.
- Facing unbearable heat, Qatar has begun to air-condition the outdoors
- Radical warming in Siberia leaves millions on unstable ground
- Fires, floods and free parking: California’s unending fight against climate change
- ‘The ice used to protect them. Now their island is crumbling into the sea.’
- Facing catastrophic climate change, they still can’t quit Big Oil
- ‘How we know global warming is real’
Houston has been hit hard.
Energy companies across Texas have had mass layoffs. In the Houston area, there could be up to 300,000 jobs lost, the Los Angeles Times reports, a figure worse than losses during the recession in 2008.
Beyond the oil and gas industry, these cuts could have a domino effect on organizations that rely on donations from oil and gas firms. And beyond Texas, fracking has slowed in Colorado, North Dakota and Oklahoma, per the report.
Chris Williams, who was laid off last week after 15 years working in the oil sector, told the L.A. Times he has applied for numerous new jobs online, including minimum-wage retail and grocery positions, and contacted friends across industries. But he acknowledged the oil slowdown has had a ripple effect on other area industries. “People outside of Texas don’t realize how much revenue, how much lifeblood, oil brings,” Williams said.
A Texas regulator who proposed requiring oil output cuts says the effort is “dead.”
The Texas Railroad Commission was meant to vote this week on a measure to mandate curbing output, but one regulator, Ryan Sitton, now says the three-member agency is not prepared to vote, Bloomberg News reports.
“His comments likely mark the end of a month-and-a-half-long saga that divided the shale industry over whether regulators should adopt OPEC-style production caps amid a historic collapse in crude prices,” per the report. “ … Sitton, who lost the primary election for his own seat earlier this year, had been the only member of the Texas Railroad Commission — the state’s chief energy regulator — to come out in favor of production caps.”
Global warming watch
Global warming will force adjustments to the climate range that has sustained society for millennia.
A new study finds that for every 1.8 degrees Fahrenheit that the global average temperature increases, a billion people will be forced to adapt or migrate to maintain climate conditions best for crop production, livestock and a sustainable outdoor work environment, Andrew Freedman reports.
In the current climate, mean annual temperatures of greater than 84.2 degrees Fahrenheit (29 degrees Celsius) are restricted to the small dark areas in the Sahara region. (Chi Xu)
The researchers found “people, crops and livestock have heavily concentrated in a narrow band of relatively constrained climate conditions. This range, referred to in the study as the human ‘climate niche,’ has remained largely unchanged since 6,000 years ago,” he writes. “Projecting into the future using a scenario with high emissions of heat-trapping greenhouse gases, the researchers found that the position of the human climate niche is projected to change more in the next 50 years than it has during the past 6,000.”
An Amazon executive left the company over firing of warehouse workers and climate activists.
A well-regarded software engineer and vice president announced his departure from the e-commerce giant in a blog post, citing a “vein of toxicity running through the company culture. I choose neither to serve nor drink that poison.”
“Bray cited the firings of warehouse workers including Chris Smalls and Bashir Mohammed, as well as tech employees Maren Costa and Emily Cunningham, who have criticized the company’s climate policies, among others,” Jay Greene reports. “Bray said he raised his concerns through the proper channels but declined to disclose those conversations in his blog post.”
Amazon, whose chief executive Jeff Bezos owns The Post, says the workers were fired for violating company policies, not for whistleblowing.
Groups hail a “significant” victory in challenge of oil and gas leases in Montana.
A federal judge vacated 287 oil and gas leases on federal land after environmental groups challenged the leases, arguing they violated the National Environmental Policy Act.
Obama-appointed Montana District Chief Judge Brian Morris sided with the groups over lease sales from December 2017 and March 2018. The sales covered almost 150,000 acres in eastern and central Montana, E&E News reports. “In addition to vacating the leases, Morris vacated BLM's finding of no significant impact and remanded the issue to the agency for further analysis,” per the report.
The groups “argued that the Bureau of Land Management did not consider the combined emissions impacts of the lease sales in the Hi-Line, Billings, Butte and Miles City planning areas, and inaccurately found the leases wouldn't have a significant impact on the state, by assessing each of them individually instead of referencing the other prospective drilling sites.”