Plunging oil prices are putting pressure on big energy companies that hasn’t been seen in at least a decade.
Second quarter profit numbers released by the three giant integrated oil companies in the Standard & Poor’s 500—Chevron, ExxonMobil and Occidental Petroleum—fell to $4.9 billion, according to a USA Today analysis of data from S&P Capital IQ. That’s the lowest quarterly profit in at least 10 years, taking out the previous low of $6.4 billion in the second quarter of 2009 amid the pain of the financial crisis.
The drop in oil prices and their stubborn resistance to move higher has caused enormous pain for investors in big oil. The price of West Texas Intermediate crude has lost more than half its value over the past year, a crushing blow for the big energy companies to absorb. Most of them haven’t been able to cut costs fast enough to defray the imploding price of the underlying commodity.
As of this afternoon, WTI was selling for $46.88 per barrel, down 3.4% or $1.64 on the day. Investors aren’t wasting any time adjusting the stock prices of the big oil companies to reflect their profit freefall. Shares of ExxonMobil—the biggest oil company—fell another 4.1% today to $79.65 after the company reported a 49% drop in adjusted quarterly profit of $1.06 a share. Shares of Exxon are down 14% this year.
Chevron shares are also tumbling $3.72, or 4%, to $89.33 today following its report showing quarterly profit dropped a staggering 83% during the period to 50 cents a share. Shares of Chevron are down 20% this year.
But the true impact of the implosion of energy profits is seen by looking at just how rapidly the entire industry’s bottom line has contracted. Oil investors can only hope oil prices hit bottom. The recovery in energy profits, though, could be a slow one.
