BP, Exxon And Shell – Giants Or Dinosaurs In The Making?

Chevron CVX kicked off the earnings season last Friday, disappointing Wall Street with its third straight quarterly loss and showing just how brutal the oil price war was.

This week, Exxon Mobile Corporation XOM and BP p.l.c. BP this Tuesday. Royal Dutch Shell (NYSE: RDS-A)(NYSE: RDS-B) took Thursday's stage and Total TOT will report on February 9th.

As for this week's news, Exxon reported a fourth consecutive loss, BP plunged to its first annual loss in decades and Shell recorded negative income attributable to shareholders for the first time since the unification of Royal Dutch Petroleum Company and Shell Transport & Trading company in 2005. Regardless of the remaining financial disclosure of Total, 2020 was the far worst year of the 21^st century.

Giants are in for a complete makeover

It seems like that emission-cutting plans will play the main role in 2021 as the entire world is interested in reducing its carbon footprint. The U.S.'s return to the Paris Agreement could bring a strong wind in the green energy sails. Although it looks like a large blow for the oil giants, diversification can boost stock prices, if done properly. However, before the oil industry becomes greener, it will have to face massive asset streamlining and inorganic growth to adapt to the new circumstances.

Exxon is feeling the heat

Exxon Mobil announced its fourth consecutive quarter in the red, due to an unprecedented coronavirus pandemic which annihilated global oil demand. The report says that Exxon Mobil lost $20.1 billion in the fourth quarter of 2020. Earnings per share were 3 cents, excluding items. This is 2 cents higher than what analysts expected and caused shares price to rise by 1.6% on Tuesday. Still, revenues were 4.55% lower than expected, which amounted to $46.54 billion, while Wall Street analysts expected $48.76 billion. As its share price dropped about 26% over the past twelve months, the observers cannot help but wonder if what was once the biggest company in the world is now a dinosaur that cannot transition to the green era.

BP's weak results show that recovery has barely begun

BP showed us that, despite expectations, the healing of Big Oil's wounds is still far from certain. Although company showed a modest profit, it is just a pale shadow of the previous year's performance. Namely, BP's fourth quarter adjusted net income was $115 million, down from $2.57 billion a year before. The company fell short by $440 million from the average analyst estimate. Cash flow was insufficient to cover dividends and capital expenditure regardless of severe capital expenditure cuts. This raises questions regarding company's ability to sustain the returns to investors. The share price fell 4.5%.

Shell raises dividends regardless of the sharp drop in full-year profit

Unlike other Big Oil members, Shell reported adjusted earnings of $4.85 billion for the full year 2020, which is 5.83% lower than what analysts expected. The pandemic struck heavily on Shell since 2019 profit was $16.5 billion. Income attributable to shareholders of Shell has fallen by 237% to a loss of $21.7 billion in 2020, unlike a $15.8 billion profit in 2019. Nevertheless, the company announced that it would raise first-quarter dividends to $0.1735 per share, which presents a 4% increase from the previous quarter. Shares of the company have risen by 3% year-to-date, while they plummeted 44% in 2020.

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