Investors in the oil and gas industry are bracing for what analysts suggest will be shocking news in the next few weeks as companies report their quarterly results.
Magellan Midstream in Tulsa will issue its report and hold an annual shareholders meeting Thursday. Williams Cos. will hold a meeting on Tuesday and Cheniere Energy will issue an earnings report on April 30. Others will follow and shareholders can only anticipate the gut-punching news.
Results so far bear out that the season will be grim for energy. On Monday, U.S. oilfield services giant Halliburton reported a $1 billion first-quarter loss on charges and outlined the largest budget cut yet among top energy companies, including more layoffs above and beyond the 600 workers let go earlier in the year in El Reno and the 350 last week in Duncan.
Forecasts for U.S. energy sector earnings this year have dropped along with oil prices, weighing on shares along with worries over debt, layoffs and possible bankruptcies according to a report by Reuters.
Analysts see a 58.9% year-over-year decline in energy earnings for the first quarter, steeper even than the 37.7% decline they projected at the start of the month, according to IBES data from Refinitiv. For the year, energy earnings are estimated to drop more than 95%.
Down a whopping 46% since Dec. 31, energy is by far the S&P 500’s worst-performing sector this year. For many Wall Street strategists, it has become a sector that is hard to recommend.
“It’s all messy, and it suggests there’s no easy way out of this. We have too much supply and too little demand,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis, which downgraded energy shares to its “most unfavorable” rating from “neutral” in early February.
The supply-demand situation needs to improve for the outlook to get better, he said. “What it needs, in a market with investors that have very little patience, is probably for some time to pass.”
Oil prices have sold off amid concerns about rapidly filling storage space at the key Cushing, Oklahoma, delivery point, as demand collapses with the shutdown of businesses as U.S. states try to contain the coronavirus outbreak.
The spread of the coronavirus has cut fuel demand by roughly 30% worldwide in recent weeks, though oil inventories already had been building after Saudi Arabia and Russia in early March failed to come to terms on extending output cuts.
On Monday, U.S. oil prices ended in negative territory for the first time in history, with the May U.S. WTI contract settling at a discount of $37.63 a barrel.
Source: Reuters
