As major oil companies prepare for the upcoming financial reports, the outlook for refining profits appears bleak. Chevron, Exxon Mobil, and Shell have all reported weak fourth-quarter earnings, primarily due to declining refining margins. Chevron's shares fell by 4% after it announced a loss in refining for the first time since 2020, while Exxon Mobil's adjusted earnings from refining plunged by 75% compared to the previous quarter. Shell's fourth-quarter earnings nearly halved to $3.66 billion, reflecting the industry's struggles. Independent refiners like Phillips 66 and Valero also faced significant profit drops, with Valero's refining profit plummeting by 73% in the fourth quarter. Concerns have been further exacerbated by US President Donald Trump's tariff threats on crude imports, which could impact US refiners significantly. TotalEnergies and BP are set to report their fourth-quarter results on February 5 and February 11, respectively, amid these challenging market conditions. [26dc9da5]
In contrast, BP's stock has remained flat this year, currently priced at around $35 per share. The company's Q1 2024 underlying replacement cost profit was down by almost half compared to the year-ago quarter, mainly due to lower commodity market prices, a prolonged refinery outage, and weakened fuel margins. Despite weak Q1 profits, BP announced a $1.75 billion share buyback for the first quarter and plans to buy back shares worth at least $14 billion by 2025. BP's net debt grew to $24 billion, and it plans to cut at least $2 billion in costs by the end of 2026. BP stock has seen strong gains in the past three years but underperformed the S&P 500 in 2023. For the full year 2024, BP expects slightly higher reported and underlying upstream production compared to 2023. The company also invests heavily in charging stations, biofuels, hydrogen fuels, and fueling stations, aiming to be a net-zero company by 2050 or earlier. BP's stock appears cheap at current levels, with a valuation at a 15% premium from the current market price. [609e34d4]