E&Ps' 3Q20 Results Seen Rebounding After A Memorable, Brutal Spring -- RBN Energy -- September 21, 2020

RBN Energy: link here.

No one in North America’s energy sector is likely to forget the second quarter of 2020 anytime soon. In those months — April, May, and June — the demand-destruction effects of the COVID-19 pandemic took root; the price of West Texas Intermediate (WTI) bottomed out, even going negative for a day; and crude oil-focused drillers in particular shut in vast numbers of wells. In late July and August, when exploration and production companies (E&Ps) announced their results for that train wreck of a quarter, it came as no surprise that the write-downs and losses were generally immense and, in many cases, record-shattering. But WTI prices have rebounded somewhat the past couple of months, as has production, suggesting that while E&Ps third-quarter results will be far from stellar, they’ll at least show an improvement and hopefully set the stage for further gains going forward. Today, we break down second-quarter results by producer peer group and discuss the positive trends that portend improved results for the third quarter.

To set the stage, let’s review those horrible second-quarter 2020 results. WTI oil prices fell 40% in the second quarter to an average of $28.17/bbl, from $46.60/bbl in the first quarter of 2020. Even that doesn’t fully reflect the extent of the misery; the 41 major U.S. producers we track realized just $13.89 for every barrel of oil equivalent (boe) they produced in the second quarter, nearly 50% below the previous quarter and the lowest realization in more than a decade. As shown in Figure 1, the E&Ps we follow reported a combined $23.8 billion in pre-tax operating losses in the second quarter (blue bar to far right, measured on the left axis), with $18 billion of that from largely price-related impairments of the value of oil and gas reserves. First-half 2020 losses for the companies totaled $83 billion after a combined $59 billion loss in the first quarter. (As a result of massive reserve write-downs, first-quarter losses dwarfed even those seen in the second quarter. 

Second-quarter cash flow for the group was a scant $5.9 billion (orange bar to far right), down 70% from $19.1 billion in the previous quarter and 79% lower than the $27 billion in the year-ago period.

Archived.