The earnings of the international major oil and gas producing companies have suffered in the first quarter of 2020 as a result of weaker product demand caused by Covid-19 and lower realised oil and gas prices. Going into Q2 further pain is expected as realised prices remain depressed and Covid-19 disruptions continue to stifle demand.

Of the Big Oil group, Chevron stood out as the outperformer and managed to increase earnings year on year despite a poor market environment. The company saw strong downstream margins and growth in Permian production, as well as benefiting from foreign currency effects and asset sales. The company had previously planned to sanction the large Whale development in the Gulf of Mexico but has now decided to defer the decision to 2021.

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Besides Chevron, Total saw the most modest decline in year on year earnings of 35%, supported by strong LNG sales growth amid sharp declines in E&P and downstream earnings. The company reduced net investment forecasts for the year but plans to maintain investments in low-carbon electricity, in addition to a purchase agreement for further equity in the Uganda oil development, considered a low cost barrel opportunity.

Both ConocoPhillips and Exxon Mobil saw losses for the quarter and have decided to curtail short term production in North America despite year on year production growth in the region. For ConocoPhillips, the performance of the Lower 48 and Canadian businesses were particularly weak, while Exxon Mobil’s struggling downstream margins and market-related write downs pushed earnings negative.

US production increased year on year for Chevron, Exxon Mobil, ConocoPhillips and BP, emphasising the commitment and portfolio shift to the area but also raising the associated risk to Lower 48 market volatility. As a result, production curtailments in the coming months will decrease US based production in Q2.

A standard theme resonating across the group for 2020 is the emphasis on protecting dividend payments to shareholders. As the oil majors are well known to the public markets for their attractive dividend yields, prioritising these dividends may be the only way to continue to attract public investment. Investors remain sceptical as to the long term potential of such investments, particularly as share prices have tumbled across the group over recent years. Royal Dutch Shell was the only company in the group to cut its dividend and is opting to prioritise ongoing investments and balance sheet strength instead. This risky approach could have negative implications for its share price going forward.

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Big Oil’s earnings in Q1 were somewhat safeguarded by the full force of Covid-19-related volatility as the full impact was only felt from March. Going into Q2, the continuation of distressed commodity prices, company production curtailments and suffering product demand will endure further earnings pressure for the group.