Big Oil Reports: Winners And Losers

The big news this last week is the deluge of quarterly numbers coming from big oil. As always there, were winners and losers.

On the winning side, we have Chevron (CVX) and Royal Dutch Shell (RDS.A), with Chevron reporting a 24% increase in net profits for the second quarter of 2007 compared to the same period in 2006, and Royal Dutch Shell also hitting the double digit with earnings growth of 18% year-over-yera. The losing side is anchored by Exxon Mobil (XOM) and British Petroleum (BP), both of whom reported 1% decreases in second quarter profits.

Underneath these headline numbers, however, you can see the trends we've been reporting for the last few months in stark black numbers. Or red.

Political turmoil remains a constant threat. ConocoPhillips(COP) pulled out of Venezuela at the end of June, and the black mark from that withdrawal [$4.5 billion] wiped out earnings. That’s not chump change, even in the oil markets. Then there's the seemingly ever-present state of chaos in Nigeria pulling down production numbers. Oil is getting harder to find and more expensive to get out, and that’s pushing us all into some very risk situations.

Over the last quarter, Exxon, BP, and Royal Dutch Shell all reported declining production numbers - not declining revenues, but declines in the actual amount of oil coming out of the ground. Some of this was due to geopolitical issues, but part was also due to the natural decline in mature fields, adding yet more data points for the peakeys.

Meanwhile, we have OPEC standing firm before its September meeting, stating that the production quotas are appropriate and will most likely not change. Those lobbying for the persistence of the high-blue-sky can point to the positive news of new production coming from Canada oil sands, which, with oil near record highs, looks more and more financially feasible on a long-term basis. Either way, they're all making good money; if it’s oil, it’s golden.

After the earnings numbers, Oil futures are still sky high with September light crude opening at 76.70 Tuesday. If you're an environmentalist [or an investor in innovation], this is all actually a good thing. High oil prices mean alternative production [think Canada Oil Sands or even investment in Shale Oil], alternative energy, (wind farms, geothermal and solar) and biofuels (biodiesel and ethanol) are practical. Right now, the magic 8 ball points to $80, a magical, meaningless number, sure to cause sky-is-falling euphoria/panic when it comes.

Crude Facts Wall Street Journal