Following one of the biggest oil price collapses on record, which triggered supply curtailments and OPEC production cuts around the globe, the second-quarter earnings season is likely to be even uglier for the top integrated oil and gas majors than the previous one.

"Our team has forecasted earnings for 72 quarters and 2Q20 seems the most difficult of them," Jefferies analyst Jason Gammel wrote in a July 15 note to clients. "All business segments of the [integrated oil companies] were negatively affected by COVID-19. ... Not only were price and margins depressed, they were volatile, which could mean big variances in realized prices."

Evercore ISI analyst Doug Terreson agreed in a July 21 note to clients, saying he was sharply lowering his earnings estimates for "Big Oils" for the second quarter due to weakness in not only oil and natural gas prices but refining and chemical margins as well.

Crude oil prices started to plunge in March as coronavirus-induced lockdowns slashed petroleum demand around the world. At the same time, global oil supply was on the rise. The resulting market blowback forced even the largest oil companies with the deepest pockets to slash spending plans and near- and medium-term price decks.

BP PLC, Eni SpA and Royal Dutch Shell PLC also recently disclosed upstream asset impairments for the second quarter. While the writedowns will not affect adjusted earnings for the period, they will significantly lower book equity, Gammel said.

Shell will announce the exact impairment figure when the company releases second-quarter earnings results on July 30, and it is expected to be big.

"It could be as much as $22 billion post-tax. It will be a major number," Shell CEO Ben van Beurden said in a July 6 recorded interview with IHS Markit.

To address the crash in oil prices, all the majors cut capital spending and reduced operating expenses, and some even suspended stock buyback programs. But Shell, known for its solid dividend, took it a step further and cut its payout to shareholders, the first time it has done so in more than 70 years. Norway's Equinor ASA, which on July 24 will be the first major integrated oil and gas company to report second-quarter earnings, was also the first to announce a dividend cut.

Even before the price collapse, Shell's debt had been growing. Shell slowed its share buyback program in January and reported that gearing — a ratio of debt to equity — was 28.9% in the first quarter, above its target of 25%.

Although oil companies do all they can to preserve dividends in times of financial distress, focusing instead on capital discipline and operating efficiencies as a way to retain capital, Eni and BP could be next in line to trim dividends in light of the oil market meltdown, Gammel said.

The last time BP cut its dividend was in 2010 after the Deepwater Horizon oil spill, AJ Bell investment director Russ Mould said previously.

At the end of the first quarter, BP's debt was $51.40 billion, up from $45.08 billion a year earlier, and gearing rose to 36%, from 31.1% in the fourth quarter of 2019 and well above the company's forecast range of 20% to 30%. Gammel said BP's gearing is likely to remain in the low 30% range in the near term.

For U.S. major Exxon Mobil Corp., this could be the second-straight quarter that earnings end up in the red. Exxon posted a first-quarter GAAP net loss of $610 million, or 14 cents per share, down from a gain of $2.35 billion, or 55 cents per share, in the same quarter a year earlier. That loss included a $2.9 billion noncash charge from inventory-related write-downs.

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