3 Oil Companies Still Making Money with Current Oil Prices

3 Oil Companies Still Making Money with Current Oil Prices

Oil prices have experienced a steep correction since mid-2014, with West Texas Intermediate (WTI) futures falling from above $100 to below $45 a barrel. Such an abrupt correction has led to challenging times for oil companies, which quickly had to adapt to the new price climate.

The rapid price correction has forced oil companies to reorganize. Changes necessary for survival have included adjusting production rates and cutting operating costs. For many companies, these measures simply are not enough to compensate for low oil prices, and, as a result, they are unable to generate profits.

Although they may seem difficult to find, some of the major oil companies have continued to make profits so far in 2015, even with the lowest oil prices in about a decade.

Chevron

Chevron Corporation (NYSE: CVX) reported a third quarter 2015 profit of $2.04 billion, or $1.09 per share. Even though the company remained profitable, the low oil prices have impacted Chevron's earnings. In the same quarter of 2014, Chevron's earnings were more than double, at $5.59 billion.

Over the first nine months of 2015, Chevron's profit was $5.18 billion, well below the $15.77 billion earned in the first nine months of 2014.

Chevron decreased its capital expenditures in the first nine months of 2015, to $25.3 billion, down from $29 billion in the corresponding 2014 period. The company continued to sell certain assets. Both these measures helped the company remain profitable while oil prices fell.

Total

Total SA (NYSE: TOT) earned $1.07 billion or 45 cents per share in the third quarter of 2015, down from the $3.53 billion or $1.52 per share earned in the third quarter of 2014. Over the first nine months of 2015, the company’s net income was $8.4 billion.

The main drivers behind the company's ability to stay profitable included an increase in oil and gas manufacturing and strong growth in the company’s downstream refining division.

Exxon Mobil

Exxon Mobil Corporation's (NYSE: XOM) third quarter 2015 results showed that the company earned $4.2 billion, or $1.01 per diluted share in the quarter. For the first nine months of 2015, the company earned $13.37 billion, or $6.04 per share. In the third quarter of 2014, Exxon earned $8.07 billion, or $1.89 per share, and in the first nine months of 2014 the company earned $25.95 billion, or $3.18 per share.

To stay profitable, the company cut its capital and exploration expenditures by 22% versus the third quarter of 2014. The company's oil equivalent production increased by 2.3% in the third quarter of 2015 from the third quarter of 2014

Maintaining Profitability

Oil prices are highly cyclical, and oil companies should never run their businesses under the assumption that high prices will last for sustained periods. There is a huge difference between a company that can survive when oil is $100 a barrel oil versus one that can remain profitable when oil falls below $50 a barrel. Companies that take on too much debt or purchase assets with high operation costs will struggle when prices fall.

Even the most well-run oil company must adapt to falling prices. All of these profitable oil companies have experienced steep declines in earnings, but they have adjusted their businesses to continue to make money. These profitable companies have changed in numerous ways, including increasing output in more profitable lines of business and decreasing output in less profitable sectors. Some companies sold non-core assets, while others have lowered operation costs through layoffs and restructuring. However, these companies laid the foundation for continued profitability by staying fiscally responsible even when oil prices were high.