OIL & ENERGY INSIDER

 Oil prices have hit a 5-month low as COVID cases climb, new lockdowns are put in place and reports emerge that OPEC may not maintain its production cut in 2021.

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Friday, October 30th, 2020

Oil prices plunged this week after spending months trapped in a narrow range around $40 per barrel. Renewed national lockdowns in France and Germany rattled financial markets, while the U.S. case count for covid-19 remained at record levels and may continue to rise. “As lockdowns begin to bite on demand concerns across Europe, the near-term outlook for crude starts to deteriorate,” said Stephen Innes, chief global market strategist at Axi. In early trading on Friday, WTI fell to $35 per barrel and Brent was at $37.

ExxonMobil warns of massive $30 billion write down. ExxonMobil (NYSE: XOM) posted a third-quarter loss of $680 million, or 15 cents per share, a smaller loss than expected. Exxon’s debt has climbed to $68 billion, more than triple since 2014. But the bigger news was that CEO Darren Woods warned that the company may take a $30 billion write-down, largely related to its North American shale gas assets. Exxon overpaid for XTO Energy more than a decade ago, right before a steep drop in natural gas prices. 

ExxonMobil to cut jobs; keeps dividend flat. ExxonMobil (NYSE: XOM) kept its dividend flat for the first time in nearly 40 years. But with a dividend yield in excess of 10%, the oil major will be under pressure going forward. Exxon will also cut 15% of its workforce, which will translate into job losses of about 1,900.

Chevron reports small loss. Chevron (NYSE: CVX) reported a $207 million loss in the quarter. 

Total and Shell post small profit. Total (NYSE: TOT) reported earnings of $848 million in the third quarter, down 72% from a year ago. Royal Dutch Shell (NYSE: RDS.A) reported a small $955 million profit in the third quarter, and hiked its dividend. The performance is dramatically better than the second quarter, but down from the $4.77 billion it earned in the third quarter of 2019. “We are starting a new era of dividend growth,” Shell’s CEO Ben van Beurden told reporters.

OPEC members reluctant to extend cuts. Three of the biggest OPEC producers behind Saudi Arabia may not be on board with extending the current cuts into next year. Iraq, the United Arab Emirates (UAE), and Kuwait are reportedly not particularly inclined to support a rollover of the cuts of 7.7 million barrels per day (bpd), because such cuts are too deep for their economies and budget incomes to sustain.

Canadian oil companies post big losses. Cenovus (NYSE: CVE) and Suncor Energy (NYSE: SU) both reported modest losses for the third quarter. Husky Energy (TSE: HSE), on the other hand, reported a huge $5.2 billion loss.

Equinor writes down $2.9 billion. Equinor (NYSE: EQNR) wrote down $2.93 billion this week after it revised down its assumptions on long-term crude oil and natural gas prices. The largest portion of the impairment came from a $1.38 billion write-down on its U.S. shale assets. 

The Interior finalizes NPR-A drilling plan. The Trump administration finalized plans to expand drilling in the National Petroleum Reserve in Alaska (NPR-A). ConocoPhillips (NYSE: COP) is the main player in the area.

Conoco warns Alaska voters not to pass tax. Alaskan voters will weigh a ballot measure that would impose a new tax on oil production. ConocoPhillips (NYSE: COP) said it would stop drilling on the north slope if the tax passes. 

Environmentalists want Biden to use financial regulation. Environmental groups are urging the Biden campaign to use financial regulation to address climate change. That would include using the Department of Treasury and the Federal Reserve to prioritize climate change. 

BNEF: Green power to attract $11 trillion by 2050. Renewable energy will draw in roughly $11 trillion in investment by mid-century.

Energy investment dries up. Energy investment is set to fall by a whopping 35% this year, according to the IEA. And this is just the spending slump in upstream oil and gas.

Will a fracking boom ever happen in Mexico? Mexico is sitting on top of the sixth biggest collective shale reserve in the entire world. At an estimated total of 545 trillion cubic feet, they’re just a hair behind the United States’ estimated 665 trillion cubic feet. So why hasn’t Mexico had its own shale revolution?

North Dakota repurposes covid aid for fracking. North Dakota decided to use $16 million given to the state from federal coronavirus relief aid and used the money to subsidize drilling. 

Repsol invests more in renewables than oil and gas. Spanish oil giant Repsol (BME: REP) has invested more in renewable energy projects in recent months than it has on oil and gas exploration.

Asia LNG prices surge, but rally takes a pause. Prices for LNG earlier this year fell below $2/MMBtu (JKM prices), a dramatic collapse due to oversupply. The crash forced widespread LNG cancellations from the United States. JKM prices have since surged above $7/MMBtu, but the rally took a breather this week. U.S. LNG has returned, adding supply to the Asian market. Also, Asian buyers are finishing up their winter purchases, so the demand pressure could ease. 

Other earnings roundup: Imperial Oil (TSE: IMO) ekes out a small profit; Phillips 66 (NYSE: PSX) reported a smaller-than-expected Q3 loss; Xcel Energy (NASDAQ: XEL) reported a Q3 profit; Cabot Oil & Gas (NYSE: COG) reported a small loss; Devon Energy (NYSE: DVN) reported a worse-than-expected net loss.