Another major comparison

Now that each of the supermajors has turned in their 2015 Q4 and preliminary full-year reports, it is time for some commentary.


IRVING, Texas – February 2, 2016 – Exxon Mobil Corporation today announced estimated 2015 earnings of $16.2 billion compared with $32.5 billion a year earlier.

Exxon forecast capital spending at around $23.2 billion this year, a 25 percent drop from 2015.

Summary: Their profits have halved last year so they’re cutting CAPEX further for 2016.  They don’t need to lay anyone off because they’re still making a cool $16bn and weren’t overstaffed to begin with.  As several other commentators have pointed out, ExxonMobil seems to be the only major that considered the full business cycle and hence was prepared for the inevitable downturn.


Royal Dutch Shell has become the latest oil major to reveal the hefty toll the sharp slump in crude prices has taken on its earnings as it posted an 80 per cent decline in full year profit to $3.8bn.

The company on Thursday reiterated plans to slash capital investment, dispose of $40bn of assets and cut 10,000 jobs.

Summary: Their profits are rapidly going down the drain so they’re laying off another 10,000 people.  Some of these will be BG employees caught up in the merger which people are beginning to seriously doubt makes sense at anything less than $60 per barrel – twice today’s price.  Shell’s claim that it is the “world’s largest oil company” must be looking a bit weak with their 2015 profits being a quarter of ExxonMobil’s.  The lean times have shown Shell’s corporate strategy to be extremely shaky when the oil price is not at historical highs.  If the oil price doesn’t pick up in 2016, we might see a wholesale clear-out at the top and large-scale restructuring.


French oil major Total has reported a 20% increase in annual net profit to $5.1bn, compared with $4.2bn a year earlier.

As with other oil firms, the rise in net profit came thanks to its oil refinery business, which saw a 96% increase to $4.9bn in the year.

Total is probably the surprise package here, having posted greater profits than their much larger peers Shell, Chevron, and BP.  With the profits from Marketing & Services growing by 35% to add to that impressive 96% increase in Refining & Chemicals profits, this justifies the decision of Total and the other  majors not to follow the ConocoPhillips route of separating upstream and downstream into separate companies.  However, Total’s upstream profits fell by 55% in 2015 and the CEO Patrick Pouyanne announced in January that they would not be cutting staff as the other majors have been doing.  This then raises the question of how Total intends to cut its costs: if the strategy involves selling off productive assets to raise cash and simply not bothering to invest in new projects for a year or two, then the impressive results of 2015 might have come at a high cost in terms of future production.


BP is to axe another 7,000 jobs after reporting an annual loss of $6.5bn (£4.5bn), the worst in its history.

Bob Dudley, BP’s chief executive, said investors who were selling their oil company shares were overreacting and had overlooked BP’s strong cash flow.

Summary: Full-on panic, leading to moronic statements from the CEO.  Since the Macondo disaster BP has adopted an aversity to risk which has paralysed decision making in the company at all levels.  Added to this has been BP’s flailing around in Russia over the last decade, with Dudley being hounded out of the country, the debacle over the failed TNK-BP/Rosneft Arctic exploration pact, and culminating with the absorption of TNK-BP by Rosneft and BP’s partnership with the state-owned behemoth.  BP may feel they have been treated unduly harshly by the US authorities over Macondo, but with this episode drawing to a close it is unlikely that this is what is fuelling investors’ concerns.  More likely, they have been as confused by BP’s strategy as I have, and harbor serious doubts that Dudley – whose judgement in Russia would surely have precluded him from the CEO spot had not it been prudent to appoint an American at the time they were pissing crude oil all over the GOM – is the right man to lead the company through this difficult period.  Dudley needs to go, sooner rather than later.  The new CEO then needs to clarify exactly what BP is doing partnering Rosneft, a company that is wholly dependent on the whims of Igor Sechin and Vladimir Putin and is under sanctions from the United States and European Union.


Full-year 2015 earnings were $4.6 billion compared with
$19.2 billion in 2014.

Summary: Numbers-wise, Chevron is in a similar situation to Shell.  However, Chevron already announced it was laying off 7,000 staff after the 2015 Q3 results and thus far has not indicated it intends to cut any further.  As my previous analysis showed, Chevron has far fewer staff than Shell and so perhaps they feel their numbers are now at an appropriate level.  Although not as lean as ExxonMobil, and far smaller on every measure, it appears Chevron’s fall in profits is due solely due to the decline in the oil price and does not point towards a muddled strategy, overstaffing, and a corporate structure ill-suited for the times.  Chevron just needs to hunker down and ride out the downturn.

“Fooled you!”


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