Big Oil and Tech Giants Report Earnings Amid Turbulent Times

Strategic Insights -

BP's fourth-quarter results, out on Tuesday, will be followed by US oil giants ExxonMobil and Conoco-Phillips, as the world's largest energy companies navigate a challenging landscape. With the global economy fighting to recover from the COVID-19 pandemic, investors will be keenly watching for signs of a turnaround in the sector. The oil majors, including BP, have been struggling to adapt to the post-pandemic world, where energy demand is expected to decline as governments push for a more sustainable future.

Key Takeaways:

  • BP's production is expected to be down 3% on the third quarter, excluding the stake in Russia's Rosneft, and down 16% year on year.
  • The company's strategic shift towards becoming an integrated energy company received a mixed reception from investors, with concerns over the economic outcomes from investments in renewable activity and the scale of this shift.
  • BP's entry into offshore wind via a strategic partnership with Equinor and recent contract wins for Chargemaster have boosted the company's exposure to alternative energy.
  • The company has also been affected by a dividend cut, heavy losses in the second quarter, and break-even results in the third quarter.
  • The oil majors are struggling to adapt to the post-pandemic world, where energy demand is expected to decline as governments push for a more sustainable future.
  • Amazon's profits have remained huge, despite the pandemic, due to its retail arm being boosted by a huge range of contracts for its cloud computing arm, AWS.
  • Amazon is facing regulatory obstacles, including a fine of up to 10% of its turnover from the European Commission for damaging retail competition.
  • Microsoft's Azure platform is snapping at the heels of AWS, with a 50% leap in revenues of its cloud computing business.

Statistics:

  • 3%: decline in oil production at BP excluding the stake in Russia's Rosneft compared to the third quarter.
  • 16%: decline in oil production at BP year on year to reflect higher maintenance and disposals.
  • US$22bn: asset impairments and write-downs at BP relating to the value of exploration assets in various countries.
  • US$82bn: net asset value (or equity) value of BP.
  • 100: number of staff remaining in BP's exploration department compared to 700 previously.
  • 50%: leap in revenues at Microsoft's Azure platform.

Sources:

  • UBS analysts.
  • Susannah Streeter, senior analyst at Hargreaves Lansdown.
  • AJ Bell analyst Russ Mould.