Last week was brutal for global oil majors with leading operators such as Chevron, EXXON Mobil, as well as others, including Total, Shell and Husky, reporting huge second-quarter losses with slumping oil prices and demand declines due to COVID-19. Reports suggest Chevron and EXXON’s poor numbers reflect the biggest losses in U.S.-based petroleum in the more than 160 years the U.S. has been selling oil products.
Chevron, amid huge write-downs, announced it will cut 5% of its global output during this quarter and will hold off on plans to ramp up production at its Permian Basin shale holdings. The company announced July 31 that it had lost (US)$8.3 billion in the second quarter. This compares to the (US)$4.3 billion it took home in Q2 profits at this time last year.
Exxon too has announced its expansion plans are on hold after reporting it generated no operational cash flow in Q2. The company reported its (US)$1.1 billion losses in the quarter were the largest since its merger with Mobil in 1998.
“While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter 2020,” Chevron offered in a statement.
Husky Energy is also reporting a large loss over the second quarter. Last week the Calgary-based major announced losses of $304 million. This contrasts with last year when the company reported profit of $370 million over the quarter. Behind the loss was the decline in crude pricing that fell from an average of $67.82 to $24.36 per barrel. Husky also suffered from an 8% decline in production as it tried to stem the damage from low oil prices.
France’s Total Energy joined the group with an $8 billion write-down of its assets of which many are in the oil sands region of Alberta. The company recently announced it would slice $5.5 billion in the value of its Fort Hills and Surmont Canadian oil sand projects.
Biggest Q2 losses were recorded by Royal Dutch Shell where losses were (US)$18.1 billion. Earnings were down 82%.
Massive losses aside, expectations are that the market is strengthening as the world seeks to normalize and move into new pandemic phases. Already companies, such as ConocoPhilips, have begun to reverse their Q2 curtailments and are ramping production upward across Canada and the U.S. markets.