International Petroleum Corporation's second quarter financial report interpretation

Shell gas station. Photo courtesy of CFP

Affected by the high oil price operation and the increase in the profitability of the refining business, the major international oil companies in the second quarter maintained a rising profit in the first quarter.

Profit growth

In the second quarter of this year, the average price of New York crude oil was 102.34 US dollars per barrel. Affected by this, the profit of international oil companies has increased substantially.

ExxonMobil took the top spot for profit. Due to the high oil price operation and the increase in non-cash and asset sales, Shell’s current net cost of supply costs has increased significantly. According to BP's profit report, the net profit in the second quarter was US$5.62 billion, a loss of US$17 billion in the same period last year. Although the cost of the Gulf of Mexico accident has gradually decreased, its quarterly profit still does not meet market expectations. Compared with the same period of last year, Total's net income in the second quarter increased by 7% in US dollars, which was mainly attributable to the favorable market environment that made up for the negative impact of changes in asset portfolio, equipment maintenance, and continuing weaknesses in European refinery profits.

Among the major international oil companies, only ConocoPhillips’ profit fell by 18.3% in the second quarter. The reason for the decline was the lack of a one-time gain of $2.9 billion from asset sales during the same period last year.

The output did not reach expectations

In the second quarter, ExxonMobil's oil and gas production increased by 10% over the same period of last year, equivalent to 4.4 million barrels per day, but this increase was mainly from the natural gas business. Among them, crude oil production reached 2.351 million barrels per day, an increase of 26,000 barrels over the same period of last year. Thanks to the increase in natural gas extracted from unconventional methods in the United States, and the increase in output of Qatar projects, natural gas production was 12.267 billion cubic meters per day, an increase of 22.42 points over the same period of last year. One hundred million cubic meters.

The oil spill in the Gulf of Mexico continues to affect BP. In the second quarter, BP’s oil and gas production was 3.43 million barrels of oil equivalent per day, which was 11% lower than the same period last year. BP said that this reflects the "sustained drilling and continuous divestment plan on the continued impact of the Gulf of Mexico production," BP expects the annual average daily output to continue close to this level. BP Chief Executive Officer Dedeli is optimistic about the company’s prospects and expects future cash flow to grow faster than output. In the second quarter of the year, ConocoPhillips’ oil and gas production in China’s oil and gas production dropped from 1.73 million barrels of oil equivalent in the same period last year to 1.64 million barrels of oil equivalent.

In the second quarter, Shell's daily oil and natural gas output fell 2% to 3.05 million barrels. Total oil and gas production fell 2% from the same period last year to 2.31 million barrels. Chevron's average daily oil and gas production in the second quarter decreased by 2.2% year-on-year.

Despite unsatisfactory output, for the more integrated international oil companies, rising oil prices, asset sales, and non-cash revenues have compensated for the impact of the decline in output to some extent. For them, how to obtain more stable production is worth considering.

Reorganization put on the agenda

While the major international oil companies announced their performance, they also put forward the focus of the next business development.

In the second quarter, Total achieved a multi-pronged performance. The successful exploration in Bolivia and Angola, the acquisition of new permits in Qatar, the acquisition of shale gas exploration rights in Poland and the launch of two offshore projects in Norway opened up new growth prospects for Total. At the same time, Total reached a definitive agreement to sell a number of non-core assets. These assets include shares held by the company's Norwegian Gassled gas pipeline network and most of the company’s sales assets in the UK.

To focus more on its own superior business, ConocoPhillips plans to split into two companies, one of which will focus on exploration and production, and the other will focus on refining and marketing operations. Conoco said that after the spin-off, the company's refining and marketing operations will become a leading refinery producer with competitive capabilities and diversified assets, while ConocoPhillips will become an independent and efficient oil exploration and production company.

Since the oil spill in the Gulf of Mexico, BP has also been planning to sell, but prices that are much higher than the book value have been ignored. BP Chief Executive Officer Dedeli said that in February this year it was expected that 2011 will be the year of consolidation because the company needs to reset its business focus. At present, although there has been a slight impact on production and costs, related work is progressing well. He believes that the BP recovery trend will continue into 2012 and 2013.

expert's point

Is business restructuring a trend for international oil companies?

Business restructuring is divided into two types. One is the crisis, companies need to adjust their assets and get rid of some burdens to adapt to market changes. The other is based on optimistic market prospects, the company expands, merges and reorganizes some company's business, and enhances its own competitiveness.

At present, the restructuring of the international oil companies is mainly the adjustment of the direction of business, which belongs to the category of business upgrade optimization and is not in a major period of change. For instance, the reorganization of ConocoPhillips is a separation of upstream and downstream businesses. It is a choice that avoids weaknesses and gives play to their strengths. This is a development strategy, but it cannot be said to be the development trend of international oil companies. (Director of Macroeconomic Research Department, National Information Center, Niu Li)