Industry Overview - The crude oil pricing environment is expected to experience significant volatility, negatively impacting exploration and production activities of integrated energy companies [1] - The Zacks Oil and Gas Integrated International industry includes companies involved in upstream, midstream, and downstream operations across various global regions [3] - Integrated players are gradually focusing on renewables to lower emissions and cut carbon intensity of products sold [4] Current Challenges - The integrated energy sector is navigating a highly uncertain macroeconomic environment, with refining, renewable energy, and chemical segments under pressure due to limited market visibility [5] - A slowdown in oil production growth in the U.S. is driven by shareholder demands for capital returns rather than production expansion, leading to reduced revenues [6] - Growing demand for renewable energy is expected to decrease reliance on oil and natural gas, adversely impacting integrated energy firms primarily engaged in fossil fuel production [7] Industry Performance - The Zacks Oil and Gas Integrated International industry ranks 189, placing it in the bottom 23% of the 245 Zacks industries, indicating bleak near-term prospects [8][9] - The industry has underperformed the broader Zacks Oil - Energy sector and the S&P 500, declining 5.4% over the past year compared to the S&P 500's growth of 17.3% [10] Valuation Metrics - The industry is currently trading at a trailing 12-month EV/EBITDA ratio of 4.27X, lower than the S&P 500's 17.85X and the sector's 4.77X [13] - Over the past five years, the industry has traded between 2.75X and 6.54X, with a median of 4.11X [14] Key Companies - Chevron completed a $53 billion acquisition of Hess Corporation, enhancing its upstream portfolio and gaining a 30% interest in the Stabroek Block offshore Guyana, which holds over 11 billion barrels of recoverable oil [17] - ExxonMobil's acquisition of Pioneer Natural Resources expanded its production capabilities in the Permian Basin, allowing it to maintain low production costs and a robust project pipeline in offshore Guyana [21] - Shell's acquisition of Pavilion Energy strengthens its LNG trading capabilities, targeting a 4-5% annual increase in LNG sales over the next five years [23]

Core Insights - Chevron Corporation and Shell plc are major players in the Gulf of America, contributing significantly to U.S. crude oil production and focusing on sustainability [1][2] - The deepwater oil and gas sector is evolving with advanced technology and a strong emphasis on emission reduction, attracting investor interest [2] Chevron Overview - Chevron is enhancing its operations in the Gulf of America with new projects like Ballymore and Whale, aiming for a production increase to 300,000 net barrels of oil equivalent per day by 2026, a 50% rise from 2020 levels [3][7] - The company is leveraging its offshore experience and energy-efficient designs, with the Anchor platform tapping into high-pressure reserves and older facilities like Tahiti benefiting from updated models [3][4] - Chevron's strategy includes using simpler designs and pre-made sections to reduce development time and costs, while also minimizing pollution [4] Shell Overview - Shell is a leader in deepwater drilling, with a history of successful operations in the Gulf of America, and is known for its engineering capabilities and cost control [5][8] - The company employs standardized designs and robotics to enhance efficiency, achieving a 50% faster engineering process and a 75% reduction in manufacturing errors [6] - Shell has reduced methane emissions in the Gulf of America by 40% since 2016, surpassing its 2023 emissions target by 5% [6] Financial Performance - Over the past year, Shell's stock has remained stable, with a slight decline of 0.1%, while Chevron's stock has decreased by 3.3%, suggesting potential undervaluation for Chevron [9] - Chevron trades at a premium with a forward earnings multiple of 18.26, compared to Shell's 11.29, reflecting expectations of better profit margins from its Gulf projects [11] - Earnings projections indicate a 27% drop in Chevron's EPS for 2025, followed by a 23% rebound in 2026, while Shell's EPS is expected to fall by 20% in 2025 with a slower recovery of 10% in 2026 [12][15] Conclusion - Both Chevron and Shell are positioned strongly in the Gulf of America, with Chevron focusing on production growth and profit margins, while Shell excels in innovation and project replication [17][18] - Currently, Chevron appears to have a slight edge due to its clear production targets and projected earnings rebound, making both companies attractive options for investors seeking exposure to the offshore oil sector [18]

Core Viewpoint - Geopolitical factors have led to significant volatility in oil prices, resulting in the expectation that major oil companies will report their lowest quarterly profits in four years [1] Group 1: Oil Price Volatility - Oil prices surged by 31% over a seven-week period from May to June, but ultimately fell by 10% by the end of the quarter due to the impact of President Trump's trade war and OPEC+ production increases [1] - The volatility has caused a divergence in performance between Shell and BP, with Shell warning of a "significant decline" in trading profits while BP anticipates "strong" profits from its oil trading business [1][4] Group 2: Earnings Forecasts - Analysts predict that the combined earnings of ExxonMobil, Chevron, Shell, TotalEnergies, and BP will decline by 12% quarter-on-quarter to $19.88 billion [1][4] - The average oil price for the quarter is expected to be below $70 per barrel, complicating the ability of global energy giants to maintain shareholder returns [4] Group 3: Company-Specific Insights - Shell's trading department, typically a reliable profit source, underperformed, leading to a decline in European oil stocks, although Shell's stock rose by approximately 10% this year [7] - BP is under pressure from activist investors and has appointed a new chairman, focusing on its core oil and gas business to improve its performance [7] - Chevron has reduced buyback spending in response to falling oil prices, while ExxonMobil has increased capital expenditures to drive low-cost production growth [9][10] Group 4: Cash Flow and Shareholder Returns - The combined free cash flow of the five major companies is expected to fall short of covering planned dividends and buybacks for the third consecutive quarter [10] - If oil prices remain around $70, companies are likely to maintain buybacks, but if prices drop to $60 or lower, some may cut back on buybacks while others may continue [10]

Core Viewpoint - Shell is facing a significant decline in earnings per share (EPS) and revenue compared to the previous year, which may impact investor sentiment and stock performance [2][3]. Group 1: Recent Performance - Shell's stock closed at $71.15, reflecting a +1.18% increase from the previous day, outperforming the S&P 500's gain of 0.06% [1]. - Over the past month, Shell's shares have decreased by 0.73%, which is better than the Oils-Energy sector's decline of 3.71% but worse than the S&P 500's increase of 5.88% [1]. Group 2: Earnings Forecast - The upcoming earnings disclosure is expected to show an EPS of $1.13, indicating a 42.64% decline year-over-year [2]. - Revenue is projected at $73.7 billion, reflecting a 1.8% decrease compared to the same quarter last year [2]. Group 3: Full Year Projections - For the full year, earnings are estimated at $5.98 per share, representing a -20.48% change from the previous year, while revenue is projected at $290.48 billion, showing a +0.5% change [3]. Group 4: Analyst Revisions and Rankings - Recent revisions to analyst forecasts for Shell are crucial as they indicate shifting business dynamics, with positive revisions suggesting analyst optimism [3][4]. - The Zacks Rank system currently rates Shell at 3 (Hold), with a recent downward shift of 2.68% in the consensus EPS estimate [5]. Group 5: Valuation Metrics - Shell's Forward P/E ratio stands at 11.76, which is higher than the industry average of 11.1 [6]. - The PEG ratio for Shell is 2.04, compared to the industry average of 1.98, indicating a premium valuation relative to expected earnings growth [6]. Group 6: Industry Context - The Oil and Gas - Integrated - International industry, to which Shell belongs, has a Zacks Industry Rank of 177, placing it in the bottom 29% of over 250 industries [7].

Summary of Global Oil and Gas Valuation Report Industry Overview - The report focuses on the **Global Oil and Gas** industry, providing insights into major companies and market dynamics as of **July 18, 2025** [1][2]. Key Companies Mentioned - **India**: Bharat Petroleum, Hindustan Petroleum, Indian Oil, ONGC, Reliance Industries - **Europe**: BP, BW LPG, Ceres Power, ENI, Fuchs Petrolub, Galp, Industrie De Nora, ITM Power, MOL, Motor Oil - **North America**: Aemetis, Antero Resources, APA Corp, Chevron, ExxonMobil, Halliburton, Suncor Energy, Valero Energy - **China**: CNOOC, Petrochina, Sinopec - **Saudi Arabia**: Saudi Aramco - **Others**: Companies from South Africa, Thailand, South Korea, Japan, Australia, and Latin America are also included [2]. Core Insights and Arguments - **Valuation Metrics**: The report provides various valuation metrics such as **EV/DACF**, **FCF Yield**, and **P/E Ratios** for major oil companies, indicating their financial health and market performance [9]. - **Performance Ratings**: Companies are rated based on their performance, with **Chevron** and **ExxonMobil** receiving "Buy" ratings, while **Equinor** is rated as "Sell" [9]. - **Growth Projections**: The report includes **CAGR** estimates for 2024-2027, indicating expected growth rates for different companies, with **Cenovus Energy** projected to have a **78%** upside potential [9]. - **Market Trends**: The report highlights trends in the oil and gas sector, including shifts towards renewable energy and the impact of geopolitical factors on oil prices [6]. Important but Overlooked Content - **Analyst Conflicts of Interest**: The report discloses potential conflicts of interest due to UBS's business relationships with covered companies, which may affect the objectivity of the analysis [4][5]. - **Macro Assumptions**: The report includes macroeconomic assumptions that underpin the valuations, sourced from reputable databases like Bloomberg and Reuters [6]. - **Definitions and Metrics**: Key financial metrics and definitions are provided to ensure clarity in the analysis, such as the **Nelson Complexity Index** for refining capacity [8]. Conclusion - The **Global Oil and Gas Valuation Report** provides a comprehensive analysis of the industry, highlighting key players, financial metrics, and growth projections while also addressing potential conflicts of interest and macroeconomic assumptions that could influence investment decisions [1][2][4][5][9].

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Core Insights - The upcoming earnings reports for major oil and energy companies will reveal contrasting performance between upstream and downstream segments, with upstream likely facing lower profits due to falling oil and gas prices, while downstream operations, particularly refining, may show resilience and strength [1] ExxonMobil - ExxonMobil anticipates a significant decline in second-quarter earnings, projecting a drop of up to $1.9 billion in upstream earnings primarily due to lower oil prices impacting earnings by $1.2 billion and natural gas prices by $700 million [2][3] - The refining and chemical segments may provide a modest boost, with potential refining profits estimated to add between $100 million and $500 million, although maintenance work could limit these gains [3] BP - BP expects to increase oil and gas production beyond initial forecasts, driven by enhanced output from U.S. shale operations, but anticipates a hit of about $800 million to drilling profits due to lower crude oil prices [4][5] - The refining segment is projected to see profits rise from $15.20 per barrel in Q1 to $21.10 per barrel in Q2, potentially adding $300 million to $500 million to downstream profits [5] Shell - Shell is facing challenges with expected declines in traditional drilling production due to maintenance and asset sales, while its Integrated Gas division's production is projected to be stable [6][8] - Refining margins are expected to improve from $6.20 per barrel in Q1 to $8.90 per barrel in Q2, which may help offset weaker results from LNG and drilling operations [7][8] Industry Outlook - The refining sector within the energy industry is demonstrating notable strength, with companies like ExxonMobil, BP, and Shell benefiting from better profits from refining crude oil into fuels and other products [9] - Global oil demand remains steady, supported by summer travel and increased electricity consumption, while natural gas demand in the U.S. is also strengthening, setting the stage for potential price recovery in the latter half of 2025 [10]

Key Takeaways Shell plc (SHEL) , in a move that could reshape South Africa's energy landscape, has secured environmental approval to drill up to five deepwater wells off the country's west coast. The project targets the Northern Cape Ultra Deep Block in the Orange Basin, an area of high interest for oil explorers due to its geological continuity and proximity to Namibia, where major discoveries have already been made. The planned wells will range from 2,500 meters to 3,200 meters deep, marking a significant ...

Core Insights - Shell plc and BP p.l.c. have signed agreements with Libya's National Oil Corporation to assess hydrocarbon potential across three major oilfields, indicating a revival of foreign energy interest in Libya after years of instability [1][9] - Libya aims to attract global energy giants despite ongoing internal factional disputes and political instability [5][9] Group 1: Shell's Involvement - Shell has signed a memorandum with NOC to evaluate hydrocarbon prospects at the Atshan oilfield and other NOC-controlled areas, leading a full-scale technical and economic feasibility study for future development opportunities [2] - The company is focusing on assessing unconventional hydrocarbons, such as shale oil and gas, which require advanced extraction technologies [4] Group 2: BP's Strategy - BP plans to reopen its Tripoli office by the end of 2025, signaling a commitment to renewed exploration ambitions in Libya [3] - The company will conduct studies on the Messla and Sarir oilfields and nearby exploration areas to assess Libya's potential in unconventional hydrocarbons [4] - BP's original agreement with NOC dates back to 2007 but was suspended due to civil unrest; the force majeure was lifted in 2023, allowing onshore exploration to resume [8] Group 3: Libya's Oil Production Landscape - Libya, a member of OPEC, has faced significant fluctuations in oil production since the civil war, dropping from approximately 1.8 million barrels per day (bpd) in 2011 to around 100,000 bpd [6] - Recent production levels have stabilized between 1.2 million bpd and 1.3 million bpd, with a goal to increase output to 2 million bpd in the coming years [6][9] - Major international energy companies, including BP and Shell, have resumed drilling activities after a nearly decade-long halt, indicating a renewed push to revive Libya's energy sector [7]

Group 1 - The oil market started the week positively, with prices rising by 2% despite fluctuations due to Trump's new tariff policies and a rebound in the dollar, indicating a favorable market outlook despite OPEC+'s unexpected production increase in August [1] - OPEC+ decided to increase daily supply by 548,000 barrels in August, with expectations for further acceleration in September, suggesting a bullish sentiment in the oil market fundamentals [1] - Saudi Aramco announced a $1 per barrel price increase for its flagship Arab Light crude oil, indicating strong demand in the spot market and that new oil inventories can be absorbed [3] Group 2 - ExxonMobil warned of a $1.5 billion reduction in earnings due to commodity price volatility, with oil and gas prices expected to decline by approximately $1 billion and $500 million respectively compared to the previous quarter [5] - Shell also projected a significant decline in trading profits for the second quarter, influenced by weak performance in its oil and gas trading business, leading to a drop in its stock price [7] - The oil industry outlook appears bleak, with companies struggling to generate sufficient free cash flow for dividends and stock buybacks after record profits in 2022, amid ongoing price volatility and geopolitical tensions [7] Group 3 - There are concerns about a potential oversupply in the second half of the year due to OPEC+'s accelerated production increase, which could lead to further downward pressure on oil prices [9] - The traditional summer travel season in the U.S. has not yet shown significant increases in oil demand, raising worries about weakening seasonal demand [9] - The uncertainty surrounding Trump's tariff policies and their potential impact on economic outlook and oil demand continues to create volatility in oil prices [9]