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Analysts expect 'sleepy' Q4'20 from oil majors, but Total could buck trend

Integrated oil and natural gas companies are coming off a turbulent year, as the COVID-19 pandemic rocked the world and the oil market in 2020.

Shelter-in-place orders sacked fuel demand, and global oil prices crashed to record lows in April 2020. The combination sent even the largest energy companies scrambling to preserve cash and defend their bottom lines. All of them made hefty capital spending cuts and streamlined operations. Some trimmed dividends, and many wrote down assets.

The final quarter of 2020 will no doubt prove to be another challenging period, but most oil majors are expected to report improved sequential EPS and overall better financials for the three-month period. However, results are expected to underperform versus the prior year since energy prices have not returned to pre-COVID-19 levels.

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"We are expecting a fairly sleepy quarter for Q4 results and 2021 guides, and that is a good thing as investors continue to worry the industry will break ranks from its commitment towards capital discipline given the improvement in crude prices," Tudor Pickering Holt & Co. analysts said in a Jan. 26 note to clients.

Market estimates collected by S&P Global Capital IQ show Chevron Corp. could be the lone outlier and report lower EPS in the fourth quarter compared to both the prior quarter and the prior year.

"Driven in part by some operational hiccups at its Australian LNG facilities (Gorgon in particular), [Chevron] has underperformed the broader [integrated oil company] group by 20% since late October," Piper Sandler analyst Ryan Todd wrote in a Jan. 8 research note to clients.

Chevron, which is in the process of restructuring its business after the market collapse, acquired independent oil and gas producer Noble Energy in an all-stock deal that was completed in the fourth quarter of 2020.

Conversely, France's Total SE is likely to report the highest EPS among selected majors during the quarter, with consensus estimates at 44 cents per share.

"While depressed hydrocarbon prices continue to weigh on its production outlook, we believe that Total has plenty of flexibility with around 1 billion [barrels] of oil equivalent in short-cycle projects that could be ramped-up rapidly to capture any potential increase in prices," CFRA Research analyst Jia Man Neoh said in a Jan. 23 report.