Frigid temps hurt some oil companies’ earnings
The extreme cold North Dakota and the rest of the country saw this week will get a mention in many oil companies’ fourth-quarter earnings reports.
While likely every operator was affected, some had to lower their earnings projections while others didn’t, saying they factor extreme weather into their original predictions.
Baker Hughes Inc. announced in a release Friday that in the U.S. and North Sea, the primary reason activity declined late in the quarter was the weather.
“As a result, North American and Europe/Africa/Russia Caspian operating profit margins declined sequentially,” the company reported.
In a Jan. 7 investors’ update, ConocoPhillips said “significant weather-related downtime” hurt average production for the fourth quarter.
The problems put fourth-quarter production at about 1,475,000 barrels of oil equivalent per day, compared to 2014 guidance of about 1,600,000.
ConocoPhillips spokesman Daren Beaudo wouldn’t elaborate, and said more information would come in the fourth quarter call on Jan. 30.
Earlier this winter, Department of Mineral Resources Director Lynn Helms said issues with fracking fluids, snow obstructions on access roads and county road shutdowns affect production during the winter.
The No. 1 cause of the slowdown is difficulties with fracking, he said. Ice and snow make it harder to get water to a site, it takes longer to heat fluids and keep them warm, and flowback water can freeze and delay the process.
In early December, when North Dakota saw its first stretch of subzero days, operators were struggling.
“Things get really, really slow for them,” Helms said.
Some companies said this week that they understand what North Dakota winters can bring, and factored possible delays into earnings projections.
For that reason, Continental Resources’ guidance isn’t changing, despite delays in some completions, Senior Vice President of Operations Rick Muncrief said in a statement.
“We monitor weather continuously and empower our local field supervisors to make the decision if it isn’t prudent to proceed,” he said. “Sometimes that means restricting traffic and sometimes that means slowing some operations down.”
Whiting Petroleum Corp. also plans for the state’s inclement weather, so it’s not changing its guidance, spokesman John Kelso said.
“XTO Energy prepares for and adapts to winter weather conditions as part of our normal operations,” spokeswoman Emily Snooks said. “We did not have any unexpected interruptions in the fourth quarter.”
Hess Corp. spokesman John Roper said some trucking slowed down with icy conditions, but the company doesn’t expect a significant impact to production.
Further downstream in the oil and gas industry, refineries took a hit as well.
Marathon Petroleum Corp.’s 120,000-barrel-per-day Detroit refinery lost instrument air due to freezing temperatures, and Valero Energy Corp.’s 180,000-bpd Memphis refinery temporarily shut down, among other refinery disruptions, Reuters reported this week.