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Business

Exxon’s record-smashing Q3 profit nearly matches Apple’s

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  • Oil firm smashes Wall Street forecasts with $19.7 billion profit
  • Exxon’s fossil-fuel bets eclipse rivals Shell, TotalEnergies
  • Company projects flat oil output this year on Russia losses

HOUSTON, Oct 28 (Reuters) – Exxon Mobil Corp (XOM.N) on Friday smashed expectations as soaring energy prices fueled a record-breaking quarterly profit, nearly matching that of tech giant Apple.

Its $19.66 billion third-quarter net profit far exceeded recently raised Wall Street forecasts as skyrocketing natural gas and high oil prices put its earnings within reach of Apple’s (AAPL.O) $20.7 billion net for the same period.

As recently as 2013, Exxon ranked as the largest publicly traded U.S. company by market value – a position now held by Apple. Exxon shares rose 3% to $110.70, a record high that gave it a market value of $461 billion.

Oil company profits have soared this year as rising demand and an undersupplied energy market collided with Western sanctions against Russia over its invasion of Ukraine. U.S. exports of gas and oil to Europe have jumped and promise to set all-time profit records for the industry.

The top U.S. oil producer reported a per-share profit of $4.68, exceeding Wall Street’s $3.89 consensus view, on a huge jump in natural gas earnings, continued high oil prices and strong fuel sales.

“Where others pulled back in the face of uncertainty and a historic slowdown, retreating and retrenching, this company moved forward, continuing to invest,” Chief Executive Darren Woods told investors. Its quarterly profits “reflect that deep commitment” as well as higher prices, he added.

Exxon led record gains among oil majors in the second quarter and has leapfrogged Shell Plc (SHEL.L) and TotalEnergies SE (TTEF.PA) with earnings almost twice as big from continued bets on fossil fuels as competitors shifted investment to renewables.

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Exxon banked $43 billion in the first nine months of this year, 19% more than in the same period of 2008, when oil prices traded at a record level of $140 per barrel.

Earnings from pumping oil and gas tripled last quarter while profit from selling motor fuels jumped tenfold compared with year-ago levels. Natural gas sales to Europe and soaring demand for diesel fuel led the company’s better-than-expected results.

“The refining businesses – both in the U.S. and international – was the star performer,” said Peter McNally, an analyst at Third Bridge.

Those rising fuel profits have renewed calls by U.S. President Joe Biden for companies to invest the windfall from this year’s energy price run-up in production rather than buy back their own shares.

Exxon will maintain its $30 billion share buyback through 2023 while increasing dividends, Chief Financial Officer Kathryn Mikells told Reuters. On Friday, it declared a fourth-quarter per-share dividend of 91 cents, up 3 cents, and will pay $15 billion to shareholders this year.

Exxon said its U.S. oil and gas production from the Permian Basin was near 560,000 barrels of oil and gas per day (boepd), a record. Production for the year will increase about 20% over 2021, said CEO Woods.

“We’re optimizing and adjusting our development plans,” he told analysts, with the full-year production gain below the 25% increase Exxon had forecast in February.

Results also were helped by an almost 100,000-boepd increase over the previous quarter in Guyana, where Exxon leads a consortium responsible for all output in the South American nation.

But its withdrawal from Russia reduced its overall production forecast for the year by about 100,000 barrels per day. Exxon said its Russian assets were expropriated.

“We are going to end up at about 3.7 million barrels a day for the full year,” Mikells said, down from a 3.8 million bpd goal set in February.

Reporting by Sabrina Valle; Editing by Ana Nicolaci da Costa, Jonathan Oatis and Marguerita Choy

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Business

Shell reports drop in profit to $9.45 billion, hikes dividend

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  • Shell to boost dividend by 15%
  • Announces plans to buy further $4 billion in shares
  • Profit hit by weak LNG trading and refining

LONDON, Oct 27 (Reuters) – Shell (SHEL.L) on Thursday posted a third-quarter profit of $9.45 billion, slightly below the second quarter’s record high, due to weaker refining and gas trading, and said it will sharply boost its dividend by the end of 2022 when its CEO departs.

The British oil and gas giant also extended its share repurchasing programme, announcing plans to buy $4 billion of stock over the next three months after completing $6 billion in purchases in the second quarter.

Shell said it intends to increase its dividend by 15% in the fourth quarter, when Chief Executive Officer Ben van Beurden will step down after nine years at the helm. The dividend will be paid in March 2023.

It will be the fifth time that Shell will have raised its dividend since slashing it by more than 60% in the wake of the 2020 COVID-19 pandemic.

Shell shares were up nearly 6% by 1430 GMT, compared with a 3.5% gain for the broader European energy sector (.SXEP).

Van Beurden will be succeeded by Wael Sawan, the current head of Shell’s natural gas and low-carbon division.

With a profit of $30.5 billion so far this year, Shell is well on track to exceed its record annual profit of $31 billion in 2008.

The strong earnings were likely to intensify calls in Britain and the European Union to impose further windfall taxes on energy companies as governments struggle with soaring gas and power bills.

Van Beurden said the energy industry “should be prepared and accept” that it will face higher taxes to help struggling parts of society.

Shell’s shares have gained more than 40% so far this year, lifted by soaring oil and gas prices in the wake of Russia’s invasion of Ukraine in February and amid tightening global oil and gas supplies.

French rival TotalEnergies posted a record profit in the third quarter.

[1/2] A view shows a board with the logo of Shell at the company’s fuel station in Saint Petersburg, Russia May 6, 2022. REUTERS/Anton Vaganov/File Photo

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LNG WOES

Shell’s quarterly adjusted earnings of $9.45 billion, which slightly exceeded forecasts, were hit by a sharp 38% quarterly drop in the gas and renewables division, the company’s largest.

Earnings for the second quarter were a record $11.5 billion.

The world’s largest trader of liquefied natural gas (LNG) produced 7.2 million tonnes of LNG in the period, 5% less than in the previous quarter, mainly due to ongoing strikes at its Australian Prelude facility.

Its gas trading business was hit this quarter by “supply constraints, coupled with substantial differences between paper and physical realisations in a volatile and dislocated market.”

Earnings from the refining, chemicals and oil trading division also dropped sharply by 62% in the quarter due to weaker refining margins.

Shell said it would stick to its plans to spend $23 billion to $27 billion this year.

Shell’s cash flow in the third quarter dropped sharply to $12.5 billion from $18.6 billion in the second quarter due to a large working capital outflow of $4.2 billion as a result of changes in the value of European gas inventories.

Shell’s net debt rose by around $2 billion to $46.4 billion due to lower cash flow from operations and to pay for a recent acquisition. Its debt-to-capital ratio, known as gearing, also rose above 20%.

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Reporting by Ron Bousso and Shadia Nasralla; editing by Jason Neely, Simon Cameron-Moore and Paul Simao

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Shadia Nasralla

Thomson Reuters

Writes about the intersection of corporate oil and climate policy. Has reported on politics, economics, migration, nuclear diplomacy and business from Cairo, Vienna and elsewhere.

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Business

Wall Street banks’ profits slide as economic clouds loom, some beat forecasts

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Oct 14 (Reuters) – Profits slid at Wall Street’s biggest banks in the third quarter as they braced for a weaker economy while investment banking was hit hard, but investors saw a silver lining with some banks beating estimates.

JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N), Citigroup Inc (C.N) and Wells Fargo & Co’s (WFC.N) showed a slide in net income after turbulent markets choked off investment banking activity and lenders set aside more rainy-day funds to cover losses from borrowers who fall behind on payments.

“We’re in an environment where it’s kind of odd,” said JPMorgan Chief Executive Officer Jamie Dimon, who said that while the bank was “hoping for the best, we always remain vigilant and are prepared for bad outcomes.”

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Central banks globally have been battling surging inflation which is expected to cause an economic slowdown. The Federal Reserve has raised the benchmark interest rate from near zero in March to the current range of 3.00% to 3.25% and signaled more increases.

Rising rates tend to buoy bank profits, but the broader risk of an economic downturn sparked by high inflation, supply-chain bottlenecks and the war in Ukraine could weigh on future earnings.

On a conference call, Dimon said U.S. consumers remained strong and he wasn’t predicting a recession but “there are a lot of headwinds out there.”

Money that people have in their checking accounts will “deplete probably by sometime midyear next year” while they are contending with headwinds like inflation, higher rates and higher mortgage rates, he cautioned.

Banks set aside more money in preparation for a hit from a potential economic slowdown. JPMorgan set aside $808 million in reserves, Citi added $370 million to reserves and Wells had a $385 million increase in the allowance for credit losses.

Still, shares of JPMorgan and Wells Fargo gained strongly, up 2.5% and 3.7% respectively while Citi gained 1.2% as the profit falls were not as deep as feared.

JPM also said it hopes to be able to resume stock buybacks early next year, although other banks were less bullish with Citi saying buybacks continue to be on hold and Wells Fargo saying it continues to be prudent about buybacks.

“JPMorgan delivered a solid set of results, from top to bottom,” Susan Roth Katzke, an analyst at Credit Suisse, wrote in a note. “At least equally as important is the evidence of preparedness to manage through whatever turn the macro takes; expect the latter to be in focus.”

JPMorgan reported a 17% drop in third-quarter profit to $9.74 billion, although that was less than had been feared. Wells Fargo posted a 31% decline to $3.53 billion but it also beat expectations. And Citi reported a 25% drop to $3.5 billion which also beat expectations.

“Most of these banks are making more spread income now than ever because of the change in interest rates,” said Chris Marinac, Director of Research at Janney Montgomery Scott. “And this was the first quarter where you had the full effect of the Fed, because the Fed increased a little bit in May.”

Signage is seen at the JPMorgan Chase & Co. New York Head Quarters in Manhattan, New York City, U.S., June 30, 2022. REUTERS/Andrew Kelly

JPMorgan said net interest income rose 34% to a record $17.6 billion, up 34%.

“Generally banks obviously seem to be benefiting from a higher rate environment, and we’ve obviously seen banks able to earn, in terms of revenues, on higher interest rates,” said Eric Theoret, global macro strategist at Manulife Investment Management.

Marinac said investors would want to see banks build reserves at this point in the economic cycle.

“They’re bracing for a hard landing, because they’re building the reserves,” said Marinac. “But that’s not necessarily a bad thing.”

While a number of the banks managed to beat expectations, Morgan Stanley reported a 30% slump in profit to $2.49 billion which missed estimates. Its shares fell 5%.

Morgan Stanley’s earnings showed that investment banking revenue more than halved to $1.3 billion with declines across the bank’s advisory, equity and fixed income segments.

Reuters Graphics

James Gorman, Chairman and Chief Executive Officer of Morgan Stanley, said his firm’s performance was “resilient and balanced in an uncertain and difficult environment.”

Corporations’ interest in mergers, acquisitions and initial public offerings dried up, particularly hitting banks strong in investment banking. Global M&A lost ground in the third quarter with volumes in the United States plummeting nearly 63% as the rising cost of debt forced companies to postpone big buyouts.

While banks were optimistic they could weather the likely tougher economy ahead, some observers were concerned about the long term outlook for growth.

“Against the backdrop of economic headwinds, the solid earnings reports from this morning will quickly pass into the rearview mirror,” said Peter Torrente, KPMG US National Sector Leader for Banking and Capital Markets. “Worries of inflation, which shows little sign of slowing down, are casting a long shadow on future outlook.”

Torrente said while banks’ revenues reflect the benefit of rising interest rates and persisting loan demand, the buildup in loan loss provisions also reflects the uncertainty in the road ahead.

“Next quarter and beyond, credit risk, loan growth, and deposit balances will be key areas to monitor in the banking industry,” Torrente said.

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Reporting by Saeed Azhar and Lananh Nguyen and Davide Barbuscia in New York, Noor Zainab Hussain, Niket Nishant, Mehnaz Yasmin, Sweta Singh and Manya Saini in Bengaluru
Writing by Megan Davies
Editing by Lananh Nguyen, Mark Potter, David Gregorio and Chizu Nomiyama

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Business

HSBC hangs up on Ping An break-up call, lifts payout and profit goal

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  • HSBC to revert to paying quarterly dividends from 2023
  • Aims to win over investors with higher profitability target
  • Says demerger of Asian business has huge risks
  • London shares rise 6%

LONDON/SINGAPORE, Aug 1 (Reuters) – HSBC (HSBA.L) pushed back on a proposal by top shareholder Ping An Insurance Group Co of China (601318.SS) to split the lender, a move Europe’s biggest bank said would be costly, while posting profits that beat expectations and promising chunkier dividends.

London-headquartered HSBC’s comments on Monday represent its most direct defence yet since news of Ping An’s proposal for carving out the lender’s Asian operations broke in April. It comes ahead of HSBC’s meeting with shareholders in Hong Kong on Tuesday where the Chinese insurer’s proposal will be discussed.

And in moves that pleased investors, HSBC raised its target for return on tangible equity, a key performance metric, to at least 12% from next year versus a 10% minimum flagged earlier. It also vowed to revert to paying quarterly dividends from early 2023.

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HSBC’s shares rose 6% in early London trade on Monday, the highest since end-June.

“We have sympathy for Ping An and all our shareholders that our performance has not been where it needed to be for the last 10 years,” Chief Executive Noel Quinn, who has run the bank for more than two years, told analysts.

Asia is HSBC’s biggest profit centre, with the region’s share of the lender’s profit rising to 69% in the first half from 64% a year ago.

Without directly referencing Ping An by name in its earnings presentation earlier on Monday, HSBC said a break-up would mean a potential long-term hit to the bank’s credit rating, tax bill and operating costs, and bring immediate risks in executing any spinoff or merger.

“There would be a significant execution risk over a three to five year period when clients, employees and shareholders would all be distracted,” Quinn said on the call, regarding the break-up proposal.

Some investors in Hong Kong, HSBC’s biggest market, have come out in support of Ping An’s proposal. They have been upset after the lender cancelled its payout in 2020. read more

Quinn said HSBC would aim to restore its dividend to pre-COVID-19 levels as soon as possible.

Discussions with Ping An had been around purely commercial issues, the CEO said, in response to a question from a reporter about whether politics was influencing the Chinese investor’s call for the bank to break up.

HSBC has shared the findings of a review by external advisers into the validity of its strategy with its board, but will not publish them externally, Quinn told Reuters.

He said HSBC had published detailed information on its international connectivity and revenue for all its shareholders to understand the value of the franchise and its strategies.

Ping An, which has not confirmed or commented publicly on the break-up proposal, owns around 8.3% of HSBC’s equity. A Ping An spokesperson declined to comment on HSBC’s results and its strategy.

EARNINGS BEAT

Last week, Europe’s lenders offered some positive surprises on profits. read more

Dual-listed HSBC followed in their footsteps, posting a pretax profit of $9.2 billion for the six months ended June 30, down from $10.84 billion a year ago but beating the $8.15 billion average estimate of analysts compiled by the bank.

Quinn, under whose leadership HSBC has ploughed billions into Asia to drive growth, said the upgraded profitability guidance represented the bank’s best returns in a decade and validated its international strategy.

Instead of the break-up, HSBC will focus on accelerating the restructuring of its U.S. and European businesses, and will rely on its global network to drive profits, the lender said.

Analysts at Citi said the new guidance implied earnings upside for HSBC. “The beat this quarter could result in high single digit consolidated profit before tax upgrades,” they said in a report. https://bit.ly/3BwBEXV

HSBC is paying an interim dividend of 9 U.S. cents per share. It also said stock buybacks remain unlikely this year.

It reported a $1.1 billion charge for expected credit losses, as heightened economic uncertainty and rising inflation put more of its borrowers into difficulties.

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Reporting by Anshuman Daga and Lawrence White; Editing by Muralikumar Anantharaman

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Business

Shell smashes record again with $11.5 billion profit

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General view of a Shell petrol station sign in Milton Keynes, Britain, January 5, 2022. REUTERS/Andrew Boyers/File Photo GLOBAL BUSINESS WEEK AHEAD

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  • Shell announced $6 bln buyback programme
  • Refining margins triple in second quarter
  • Strong gas and power trading lift profits

LONDON, July 28 (Reuters) – Shell (SHEL.L) on Thursday reported a second quarter profit of $11.5 billion, smashing its previous record just three months earlier, lifted by a tripling of refining profits and strong gas trading.

The company also announced a share buyback programme of $6 billion for the current quarter, but did not raise its dividend of 25 cents per share. It said shareholder returns would remain “in excess of 30% of cash flow from operating activities”.

A rapid recovery in demand following the end of pandemic lockdowns and a surge in energy prices, driven by Russia’s invasion of Ukraine, have boosted profits for energy companies after a two-year slump. read more

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Shell bought back $8.5 billion of shares in the first half of 2022, and the new repurchase programme is significantly higher than forecasts.

“The strong oil price backdrop has helped Shell deliver a blockbuster set of results. The dividend may have remained the same, but the share buyback programme is positive news for shareholders,” said Stuart Lamont, investment manager at Brewin Dolphin.

Shell shares were up 0.9% at the opening of trading in London.

French rival TotalEnergies (TTEF.PA) also reported on Thursday a record profit of $9.8 billion in the quarter and accelerated its buyback programme. read more

Norway’s Equinor (EQNR.OL) raised its special dividend and boosted share buybacks on Wednesday. read more

U.S. rivals Exxon Mobil and Chevron report results on Friday.

Oil and gas prices remained elevated in the quarter, with benchmark Brent crude averaging about $114 a barrel. Benchmark European natural gas prices and global liquefied natural gas (LNG) prices averaged an all-time high in the quarter.

REFINING BOOST

Shell’s second-quarter adjusted earnings rose to $11.47 billion, above the $11 billion forecast by analysts in a poll provided by the company.

That was up from $5.5 billion a year earlier and from $9.1 billion in the first quarter of 2022.

Shell’s strong results reflected higher energy prices and refining margins, as well as strong gas and power trading, the company said, but were partly offset by lower LNG trading results.

Refining profit margins tripled in the quarter to $28 per barrel. They have weakened substantially in recent weeks amid signs of easing gasoline demand in the United States and Asia.

Shell said its refinery utilization would increase to 90-98% in the third quarter, compared with 84% in the second quarter.

Its oil and gas production in the second quarter was down 2% from the previous quarter to 2.9 million barrels of oil equivalent per day (boepd).

Shell’s LNG liquefaction volumes stood at 7.66 million tonnes in the second quarter, down from 8 million in the previous quarter. Volumes are expected to fall to between 6.9-7.5 million in the third quarter due to strikes at its Australian Prelude site and planned maintenance.

Shell used the surge in cash generation to further reduce its debt, which stood at $46.4 billion at the end of June, compared with $48.5 billion three months earlier. Its debt-to-capitalization ratio, or gearing, declined to 19.3%.

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Reporting by Ron Bousso and Shadia Nasralla
Editing by Jason Neely and Mark Potter

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World

French election: Macron loses absolute majority in parliament in ‘democratic shock’

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  • 289 seats needed for absolute majority
  • Projections show Macron falls well short
  • Point to hung parliament
  • Question now is how will Macron govern?

PARIS, June 19 (Reuters) – French President Emmanuel Macron lost control of the National Assembly in legislative elections on Sunday, a major setback that could throw the country into political paralysis unless he is able to negotiate alliances with other parties.

Macron’s centrist Ensemble coalition, which wants to raise the retirement age and further deepen EU integration, was set to end up with the most seats in Sunday’s election. But that was well short of the absolute majority needed to control parliament, initial projections and first results showed.

Finance Minister Bruno Le Maire called the outcome a “democratic shock” and added that if other blocs did not cooperate, “this would block our capacity to reform and protect the French.”

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There is no set script in France for how things will now unfold. The last time a newly elected president failed to get an outright majority in parliamentary elections was in 1988.

A hung parliament will require a degree of power-sharing and compromises among parties not experienced in France in recent decades. Macron could eventually call a snap election if legislative gridlock ensues.

“The rout of the presidential party is complete and there is no clear majority in sight,” hard left veteran Jean-Luc Melenchon told cheering supporters.

The left-wing Nupes bloc he heads came second, initial projections showed. United behind him, leftwing parties were seen on course to triple their score from the last legislative election in 2017.

Macron, 44, became in April the first French president in two decades to win a second term, as voters rallied to keep the far-right out of power.

But, seen out of touch by many voters, he presides over a deeply disenchanted and divided country where support for populist parties on the right and left has surged.

His ability to pursue further reform of the euro zone’s second-biggest economy hinges on winning support for his policies from moderates outside his alliance on both the right and left.

ALLIANCES?

French President Emmanuel Macron and his wife Brigitte Macron arrive to vote in the second round of the French parliamentary elections, at a polling station in Le Touquet-Paris-Plage, France, June 19, 2022. REUTERS/Pascal Rossignol

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Macron and his allies must now decide whether to seek an alliance with the conservative Les Republicains, who came fourth, or run a minority government that will have to negotiate laws with other parties on a case-by-case basis.

“There are moderates on the benches, on the right, on the left. There are moderate Socialists and there are people on the right who, perhaps, on legislation, will be on our side,” government spokeswoman Olivia Gregoire said.

Les Republicains’ platform is more compatible with Ensemble than other parties. The two together have a chance at an absolute majority in final results, which requires at least 289 seats in the lower house.

Christian Jacob, the head of Les Republicains, said his party will remain in the opposition but a “constructive” one, suggesting case-by-case deals rather than a coalition pact.

“DISORDER?”

Initial projections by pollsters Ifop, OpinionWay, Elabe and Ipsos showed Macron’s Ensemble alliance winning 210-240 seats, Nupes securing 141-188 and Les Republicains 60-75.

The former head of the National Assembly, Richard Ferrand, and Health Minister Brigitte Bourguignon lost their seats, in two major defeats for Macron’s camp.

In another significant change for French politics, far-right leader Marine Le Pen’s National Rally party could score a ten-fold increase in MPs with as many as 90-95 seats, initial projections showed. That would be the party’s biggest-ever representation in the assembly.

Macron had appealed for a strong mandate during a bitter campaign held against the backdrop of a war on Europe’s eastern fringe that has tightened food and energy supplies and sent inflation soaring, eroding household budgets.

“Nothing would be worse than adding French disorder to the world’s disorder,” the president had said ahead of the second-round vote.

Melenchon’s Nupes alliance campaigned on freezing the prices of essential goods, lowering the retirement age, capping inheritance and banning companies that pay dividends from firing workers. Melenchon also calls for disobedience towards the European Union.

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Additional reporting by Benoit Van Overstraeten, Michel Rose, John Irish, Juliette Jabkhiro, Caroline Pailliez, Layli Foroudi; Writing by Ingrid Melander and Richard Lough; Editing by Barbara Lewis, Emelia Sithole-Matarise and Cynthia Osterman

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Business

U.S. gasoline average price tops $5 per gallon in historic first

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June 11 (Reuters) – The price of U.S. gasoline averaged more than $5 a gallon for the first time on Saturday, data from the AAA showed, extending a surge in fuel costs that is driving rising inflation.

The national average price for regular unleaded gas rose to $5.004 a gallon on June 11 from $4.986 a day earlier, AAA data showed.

High gasoline prices are a headache for President Joe Biden and congressional Democrats as they struggle to maintain their slim control of Congress with midterm elections coming up in November.

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Biden has pulled on numerous levers to try to lower prices, including a record release of barrels from U.S. strategic reserves, waivers on rules for producing summer gasoline, and leaning on major OPEC countries to boost output.

Yet fuel prices have been surging around the world due to a combination of rebounding demand, sanctions on oil producer Russia after its invasion of Ukraine and a squeeze on refining capacity.

DEMAND DESTRUCTION
U.S. road travel, however, has remained relatively strong, just a couple of percentage points below pre-pandemic levels, even as prices have risen.

Still, economists expect demand may start to decline if prices remain above $5 a barrel for a sustained period.

“The $5 level is where we could see very heavy amounts of gasoline demand destruction,” said Reid L’Anson, senior economist at Kpler.

Adjusting for inflation, the U.S. gasoline average is still approximately 8% below June 2008 highs around $5.41 a gallon, according to U.S. Energy Department figures.

People drive along the Governor Alfred E. Driscoll Bridge at the start of the Memorial Day weekend, under rising gas prices and record inflation, in Keasbey, New Jersey, U.S., May 27, 2022. REUTERS/Eduardo Munoz/File Photo

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Consumer spending has so far remained resilient even with inflation running at its highest level in more than four decades, with household balance sheets shored up by pandemic relief programs and a tight job market that has fueled strong wage gains, especially for lower-income workers.

Gasoline product supplied, a proxy for demand, was 9.2 million barrels per day last week, according to the U.S. Energy Information Administration, broadly in line with five-year seasonal averages.

The high prices for drivers come as major oil-and-gas companies post bumper profits. Shell reported a record quarter in May and Chevron Corp and BP have posted their best numbers in a decade. read more

Other majors, including Exxon Mobil and TotalEnergies, as well as U.S. independent shale operators, reported strong figures that have spurred share repurchases and dividend investments. read more

Numerous companies have said they will avoid excessive investment to boost output due to investors’ desires to hold the line on spending, rather than respond to $100-plus barrel prices that have persisted for months. read more

Refiners have been struggling to rebuild inventories which have dwindled, especially on the U.S. East Coast, reflecting exports to Europe where buyers are weaning themselves off of Russian oil.

Currently, refiners are utilizing about 94% of their capacity, but overall U.S. refining capacity has fallen, with at least five oil-processing plants shutting during the pandemic.

That has left the United States structurally short of refining capacity for the first time in decades, analysts said.

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Reporting by Laura Sanicola and Shivani Tanna; editing by David Clarke and Jason Neely

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Business

Exxon signals record quarterly profit from oil and gas prices

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Signage is seen on a gasoline pump at an Exxon gas station in Brooklyn, New York City, U.S., November 23, 2021. REUTERS/Andrew Kelly

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HOUSTON, April 4 (Reuters) – Exxon Mobil Corp (XOM.N) on Monday said its first-quarter results could top a seven-year quarterly record, with operating profits from pumping oil and gas alone of up to $9.3 billion.

A snapshot of the largest U.S. oil company’s quarter ended March 31 showed operating profits from oil and gas, its biggest unit, could jump by as much as $2.7 billion over the prior quarter’s $6.6 billion.

Exxon does not hedge, or lock in oil sales, and results generally match changes in energy prices. Russia’s invasion of Ukraine pushed up oil by 45% last quarter over the final period of 2021, to an average of $114 per barrel, the highest in seven years. read more

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The estimates suggest total earnings for the quarter of about $9.8 billion at the mid-point of Exxon’s estimates, according to Scotiabank global equity research.

Exxon shares, which have jumped 36% year to date, rose slightly on Monday to $83.16. Official results are expected to be released on April 29, according to a securities filing.

The outlook implies adjusted earnings around $2.29 per share, Scotiabank analyst Paul Cheng said in a note. The total would guarantee Exxon its highest quarterly profit since at least 2014.

The blockbuster oil and gas profits offer a preview of what lies ahead for other firms’ oil earnings. Such results could strengthen calls by U.S. and European Union lawmakers for windfall profit taxes on energy companies.

RUSSIA WRITEDOWN?

Final results could be dampened by impairments to Exxon’s Russian operations. The company last month said it would phase out of Russia following the invasion of Ukraine. The oil company has $4 billion in assets at risk to potential seizure and faces a 1% to 2% hit to production and revenue from the move. read more

“Depending on the terms of its exit from Sakhalin, the company may be required to impair its investment in the project up to the full book value,” it said in a filing.

High oil and gas prices accelerated after Russia’s invasion and sanctions were imposed on its oil, coal and LNG. Global oil prices hit a 14-year high in the first quarter and have since cooled as the U.S. announced a release of emergency stocks and China began a lockdown.

Operating profits in refining could be up to $300 million higher than the $1.5 billion earned in its fourth quarter, while its chemicals business could decrease by as much as $300 million compared with the previous quarter’s $1.3 billion profit.

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Reporting by Sabrina Valle; Editing by Chizu Nomiyama and Richard Pullin

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Business

Google propels record Alphabet revenue, driving shares up 8%

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The logo for Google LLC is seen at the Google Store Chelsea in Manhattan, New York City, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo

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Feb 1 (Reuters) – Google parent Alphabet Inc (GOOGL.O) reported record quarterly sales that topped expectations on Tuesday, as its internet advertising business surged on consumers using Google search as they shopped online and advertisers upping their marketing budgets.

Alphabet’s shares jumped more than 8% in after-hours trading, also rising on the company’s announcement that it would undertake a 20-to-one stock split.

The results were the latest to reinforce that the global trend toward a more digital economy has made Big Tech companies resistant to small-market shocks. While concerns about rising inflation, COVID-19 variants and supply-chain shortages have rattled Wall Street and hurt sales at some businesses, the companies that control key gateways to e-commerce, hybrid work and streaming entertainment have not seen a dip since the early days of the pandemic.

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Alphabet’s sales jumped 32% to $75.3 billion in the fourth quarter, for a third straight quarterly sales record and topping the average estimate of $72 billion among financial analysts tracked by Refinitiv.

Consumers dove into Google search looking for apparel and hobbyist items, while retail, finance, entertainment and travel advertisers raised marketing budgets, Google’s chief business officer, Philipp Schindler, said on an earnings call.

Analysts said Google, which generates more revenue from internet ads than any other company, is proving that its growth is unstoppable for the foreseeable future.

“The pandemic has handily accelerated the world’s reliance on digital advertising,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown. “Sitting through traditional TV advert breaks or reading billboards suddenly feels completely archaic in the age of streaming and mobile phone addiction.”

Shares of Alphabet rose 8.6% in after-hours trading, to $2,990.10, erasing their losses for the year-to-date. Shares of competitors in online ads including Facebook owner Meta Platforms Inc (FB.O), Twitter Inc (TWTR.N), Trade Desk Inc (TTD.O) and Snap Inc (SNAP.N) all rose as well.

Under the planned 20-for-one stock split, investors as of July 1 will receive 19 additional shares for each one held. The split, which is subject to shareholder approval, will make the stock more affordable and potentially eligible for inclusion in more market indexes.

Shares of Apple Inc (AAPL.O) and Tesla Inc (TSLA.O) rallied in 2020 after splits, but increasingly brokerages such as Robinhood Markets (HOOD.O) allow purchases of fractional shares, diminishing some benefit of the tactic.

BANNER YEAR

For the 2021 full year, Alphabet’s sales rose 41% to a record $258 billion. Sales had grown just 13% in 2020, the slowest rate in over a decade, after advertisers slashed spending in the first few weeks of the pandemic.

Across both 2021 and 2020, Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s revenues.

Companies including Amazon.com Inc and ByteDance’s TikTok have been taking small pieces of Google’s share of the global advertising market. But market forecasters do not expect major slippage in Google’s leading position. Google’s secondary businesses, including Cloud, also have been lifting overall sales.

Google Cloud, which serves clients such as online shopping software maker Shopify Inc (SHOP.TO), increased quarterly revenue by 45% to $5.5 billion, above estimates of $5.4 billion.

The division’s operating loss narrowed by 45% to $3.1 billion in 2021.

Alphabet Chief Executive Sundar Pichai told analysts that Cloud is exploring how to support clients that want to use blockchain, one of several emerging technologies that proponents view as crucial to kickstarting a new era of online innovations.

Alphabet also reported a quarterly sales record during the holiday season for its Google Pixel smartphones, despite what Pichai called “extremely challenging” supply constraints.

Alphabet’s quarterly profit was $20.6 billion, or $30.69 per share, beating expectations of $27.56 per share and marking a fourth straight quarter of record profit. The profit benefited from unrealized gains from Alphabet’s investments in startups, and the company also got a $2 billion boost last year from extending the useful life of its servers and networking gear.

For the 2021 year, Alphabet’s profit increased 89% to $76 billion.

Alphabet’s total costs in 2021 increased 27% to $178.9 billion as the company began to resume its pre-pandemic pace of hiring and construction. The company also noted increased legal fees, costs from a one-time bonus of $1,600 to all employees, and a rise in charitable contributions as it matched increased giving by employees.

Numerous lawsuits accusing Google of anticompetitive conduct in the advertising and mobile app store markets continue to be one of the company’s biggest challenges. Google already has said its efforts to lower Play app store fees to assuage some of the concerns will hurt revenue.

Alphabet’s cash hoard grew by nearly $3 billion in 2021 to $139.6 billion, with another $50 billion going to buying back shares.

The operating loss for Other Bets, a unit that includes self-driving technology company Waymo and other non-Google ventures, was $5.3 billion in 2021, widening from $4.5 billion in 2020. The company offered no 2022 financial outlook for the unit.

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Reporting by Nivedita Balu in Bengaluru and Paresh Dave in Oakland, Calif.;
Additional reporting by Diane Bartz in Washington and Noel Randewich in Oakland, Calif.;
Editing by Anil D’Silva, Matthew Lewis and Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

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Business

Tencent hands shareholders $16.4 bln windfall in the form of JD.com stake

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A Tencent logo is seen in Beijing, China September 4, 2020. REUTERS/Tingshu Wang

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  • Move comes as Beijing cracks down on technology firms
  • JD.com shares plunge as much as 11.2%, Tencent up 4%
  • Tencent has no plans to sell stakes in other firms-source

BEIJING/HONG KONG, Dec 23 (Reuters) – Chinese gaming and social media company Tencent (0700.HK) will pay out a $16.4 billion dividend by distributing most of its JD.com (9618.HK) stake, weakening its ties to the e-commerce firm and raising questions about its plans for other holdings.

The move comes as Beijing leads a broad regulatory crackdown on technology firms, taking aim at their overseas growth ambitions and domestic concentration of market power.

Tencent said on Thursday it will transfer HK$127.69 billion ($16.37 billion) worth of its JD.com stake to shareholders, slashing its holding in China’s second-biggest e-commerce company to 2.3% from around 17% now and losing its spot as JD.com’s biggest shareholder to Walmart (WMT.N).

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The owner of WeChat, which first invested in JD.com in 2014, said it was the right time for the divestment, given the e-commerce firm had reached a stage where it can self-finance its growth.

Chinese regulators have this year blocked Tencent’s proposed $5.3 billion merger of the country’s top two videogame streaming sites, ordered it to end exclusive music copyright agreements and found WeChat illegally transferred user data.

The company is one of a handful of technology giants that dominate China’s internet space and which have historically prevented rivals’ links and services from being shared on their platforms.

“This seems to be a continuation of the concept of bringing down the walled gardens and increasing competition among the tech giants by weakening partnerships, exclusivity and other arrangements which weaken competitive pressures,” Mio Kato, a LightStream Research analyst who publishes on Smartkarma said of the JD.com stake transfer.

“It could have implications for things like the payments market where Tencent’s relationships with Pinduoduo and JD have helped it maintain some competitiveness with Alipay,” he said.

JD.com shares plunged 11.2% in early trade in Hong Kong on Thursday, the biggest daily percentage decline since its debut in the city in June 2020, before recovering partially to a 7% decline by 0450 GMT. Shares of Tencent, Asia’s most valuable listed company, rose 4%.

Shares of Tencent and JD on Dec 23

The companies said they would continue to have a business relationship, including an ongoing strategic partnership agreement, though Tencent Executive Director and President Martin Lau will step down from JD.com’s board immediately.

Eligible Tencent shareholders will be entitled to one share of JD.com for every 21 shares they hold.

PORTFOLIO DIVESTMENTS?

The JD.com stake is part of Tencent’s portfolio of listed investments valued at $185 billion as of Sept. 30, including stakes in e-commerce company Pinduoduo (PDD.O), food delivery firm Meituan (3690.HK), video platform Kuaishou (1024.HK), automaker Tesla (TSLA.O) and streaming service Spotify (SPOT.N).

Alex Au, managing director at Hong Kong-based hedge fund manager Alphalex Capital Management, said the JD.com sale made both business and political sense.

“There might be other divestments on their way as Tencent heed the antitrust call while shareholders ask to own those interests in minority stakes themselves,” he said.

A person with knowledge of the matter told Reuters Tencent has no plans to exit its other investments. When asked about Pinduoduo and Meituan, the person said they are not as well-developed as JD.com.

Tencent chose to distribute the shares as a dividend rather than sell them on the market in an attempt to avoid a steep fall in JD.com’s share price as well as a high tax bill, the person added.

Kenny Ng, an analyst at Everbright Sun Hung Kai, said the decision was “definitely negative” for JD.com.

“Although Tencent’s reduction of JD’s holdings may not have much impact on JD’s actual business, when the shares are transferred from Tencent to Tencent’s shareholders, the chances of Tencent’s shareholders selling JD’s shares as dividends will increase,” he said.

Technology investor Prosus (PRX.AS), which is Tencent’s largest shareholder with a 29% stake and is controlled by Naspers of South Africa, will receive the biggest portion of JD.com shares.

Walmart owns a 9.3% stake in JD.com, according to the Chinese company. Payments processor Alipay is part of Tencent rival Alibaba Group .

($1 = 7.7996 Hong Kong dollars)

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Reporting by Sophie Yu in Beijing and Scott Murdoch in Hong Kong; Additional reporting by Xie Yu, Selena Li, Donny Kwok and Eduardo Baptista in Hong Kong and Nikhil Kurian Nainan in Bengaluru; Writing by Jamie Freed; Editing by Subhranshu Sahu and Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.

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