What's In Store For SLB & Other Oil Stocks In Q2 Earnings?
Zacks Investment Research | Jul 19, 2016 10:15PM ET
Crude prices, which reached $110 per barrel in mid-2014, fell to a 12-year low of $26.21 in February as investors panicked over the oversupplied market. The commodity’s collapse threatened the industry’s creditworthiness by hurting cash flows, drying up liquidity and contracting producers’ profit margins.
However, indications of easing supply helped oil prices to rebound some 90% since then and took the commodity past $50.
The surge in the benchmark crude was driven by supply outages in Nigeria, Libya, Venezuela and Canada – countries that hold some of the world’s major sources of crude.
The upward pressure in oil prices also reflect the U.S. Energy Department's recent inventory releases that show crude stockpile builds turning into draws.
Q2: Best Quarter for Oil in 7 Years
Unlike the previous few quarters, second-quarter 2016 turned out to be a rather good one with crude advancing more than 26% sequentially -- the best quarterly percentage gain in seven years. West Texas Intermediate (WTI) crude futures during the Apr–Jun 2016 period hovered mostly between $40 and $50 per barrel.
All's Not Well for Oil
Despite oil’s massive recovery since February, its price is still under $50 – about half the level of two years ago – and far below the breakeven price for many energy companies. Therefore, the commodity is not yet out of the woods.
Even the industry, which is cutting deeper, seems to think so. Companies around the world continue to slash jobs, defer/cancel projects worth billions of dollars and renegotiate contracts with suppliers to help protect their balance sheets.
Consequently, things are looking bleak for the upcoming Q2 earnings season. Per our Zacks Investment Research
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