Crude oil prices have jumped more than $3/barrel this morning on the expectation that the European agreement on sovereign debt will put some life back into the global economy. That outcome is at least arguable, but what is inarguable are huge results at Exxon Mobil Corp. (NYSE: XOM) and Occidental Petroleum Corp. (NYSE: OXY). The sector is also getting a boost from a report that there is a takeover offer in the works for Valero Energy Corp. (NYSE: VLO), a dividend increase at Chevron Corp. (NYSE: CVX), and more asset sales by BP plc (NYSE: BP). Whew!Exxon reported EPS this morning of $2.13 on revenue of $125.33 billion. The consensus estimate was EPS of $2.13 and revenue of $113.56 billion. Though well short of its record profit of $14.83 billion in the third quarter of 2008, Exxon’s $10.33 billion profit in the most recent quarter is more than 40% higher than the same period a year ago. Higher realized prices for crude get credit for the profit hike, as production was down by -4%. Refining margins added $1 billion to profits, and higher crude prices added about $3 billion.Occidental posted diluted EPS of $2.18 on revenue of $6 billion. The consensus estimate called for EPS of $1.95 on revenue of $5.7 billion. Oxy, unlike Exxon, increased production and also benefited from higher realized prices. The company could have done even better, but lack of production in Libya held down volumes. In the third quarter of 2010, Libya contributed 11,000 barrels/day, compared with none this year.
Perhaps the most intriguing item in today’s news is that India’s Reliance Industries Ltd. is considering a takeover bid for Valero. Bloomberg reports that the Indian giant could make an all-cash offer of $48/share for the US’s largest refiner. That is more than a 90% premium to Valero’s closing price yesterday, and a total of more than $27 billion. Reliance, which has a market cap of about $1.3 trillion, could easily afford the deal, but getting US regulators to approve the sale of the country’s largest refiner to a foreign buyer will be a non-trivial exercise.
Chevron has announced another rise in its quarterly dividend. The company, which reports earnings tomorrow, has bumped its payout to $0.81, or $3.24 annually, up from $3.12. Chevron is expected to post EPS of $3.44 on revenue of $67.93 billion tomorrow, even though the company issued an interim report a couple of weeks about saying that earnings would be about flat with EPS of $3.57 in the second quarter.
Finally, when BP announced earnings earlier this week, the company said it would expand its asset sales to a total of $45 billion, a sharp increase to its previous commitment to sell some $30 billion in assets to fund its liabilities for the Macondo well disaster last year. The company has also received approval from US regulators for a new project involving four wells in the Gulf of Mexico and yesterday received a permit to beginning drilling a new ultra-deepwater well. BP’s Gulf of Mexico production fell to 250,000 barrels/day last quarter, from a pre-explosion total of 440,000 barrels/day. Getting permits to drill new holes is critical to the company’s future because it gets about 10% of its total production from its Gulf of Mexico wells.
In the first hour of trading this morning, Exxon Mobil shares are up less than 0.5%, at $81.42, in a 52-week range of $65.09-$88.23. Occidental’s shares are up more than 6.8%, at $93.14, in a 52-week range of $66.36-$117.89. Valero’s shares are up nearly 3.5%, at $26.02, in a 52-week range of $16.40-$31.12. Chevron’s shares are up more than 1.5%, at $108.45, in a 52-week range of $80.41-$109.94. BP’s shares are up about 0.6%, at $44.93, in a 52-week range of $33.62-$49.50.
Paul Ausick
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