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Last Updated: April 26, 2021
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Based on all announced corporate press releases, the amount of debt and equity issued among publicly traded independent U.S. exploration and production (E&P) companies totaled $4.4 billion in March 2021, the most since August 2020. EIA analyzed and compiled the amounts via Evaluate Energy, a data service that tracks financial information for all publicly traded oil companies. Since September 2020, the amount of issued debt and equity has increased from the previous month in all but one month.

We based our analysis primarily on the published financial reports of publicly traded companies, so the conclusions do not necessarily represent the sector as a whole because the analysis does not include private companies that do not publish financial reports.

One reason U.S. E&P companies are issuing more debt and equity is to take advantage of increasing crude oil prices. Crude oil prices have been steadily increasing since reaching multiyear lows in 2020. Brent crude oil prices averaged less than $40 per barrel (b) from March 2020 to May 2020 and have since increased, averaging more than $65/b in March 2021. Since crude oil prices began increasing, U.S. crude oil producers have been raising debt and equity to refinance debts, resume drilling activities, or purchase acreage.

In addition to higher crude oil prices, low interest rates have lowered the cost of debt and have likely contributed to the recent growth in issuing debt and equity. The Federal Reserve System’s Federal Open Market Committee has held the federal funds rate, which affects interest rates across the market, at a target of 0.00% to 0.25% since March 2020.

Corporate bond yields have also been low in the United States, contributing to lower interest rates on new bonds that companies issue and reducing the cost of issuing debt. For example, the Moody’s seasoned AAA corporate bond yield, which represents average bond yields for investment grade companies across the market, averaged 2.70% in February, which is lower than the 2011–20 average of 3.78%. In addition, corporate bond yields specific to energy sector companies with a rating lower than investment grade are at multiyear lows.

Because U.S. producers have increased access to debt and equity (among other factors), we forecast that U.S. crude oil production will increase from 10.7 million barrels per day (b/d) in first-quarter 2021 to 12.2 million b/d in fourth-quarter 2022.

monthly U.S. exploration and production companies' issuance of debt and equity

Source: U.S. Energy Information Administration, based on Evaluate Energy
Note: Analysis includes only publicly traded U.S. exploration and production companies.

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Bouncing Back – A Return to Profit Growth

It makes for a great headline. “Supermajor X reports bumper financials and a return to pre-pandemic profit levels.” After taking a hammering over 2020 as Covid-19 drastically reduced fuel consumption, a combination of the global economy re-opening and crude oil prices strengthening back to pre-Covid levels have allowed the world’s energy supermajors to record strong Q1 2021 financial results. And those great results are to the benefit of shareholders too.

BP kicked off this earnings seasons with a headline just like that. Trumpeting ‘better-than-expected’ earnings for Q1 2021, its results heralded a return to stabler footing after a prolonged period of uncertainty, with CEO Bernard Looney stating that the ‘results really answer many of those questions (of risk).’ Net profits came in at US$2.6 billion, significantly higher than the market estimate of US$1.4 billion and above the Q1 2020 net profit of US$791 million. BP attributed its performance to strong oil prices and refining margins, as well as exceptional natural gas marketing and trading performance. Net debt also fell to US$33.3 billion, meaning BP had hit its target of reduction to US$35 billion as planned. The latter raised some eyebrows, given suspicions that BP’s canny trading unit may have struck a bonanza during the chaotic winter storm that plagued Texas in March, although BP was coy on the extent to which it had profited from that crisis. Still, the results speak for itself. And shareholders will now benefit with BP stating its intention to resume share buybacks of some US$500 million in Q2 2021. It seems to be proof that even though BP has created many headlines about transitioning into a post-oil and gas supermajor, it is and will remain a traditional energy powerhouse for a while.

Royal Dutch Shell followed, announcing net profits of some US$3.23 billion, up from US$2.86 billion y-o-y and above the average analyst expectations of US$3.06 billion. This was, again, a return to pre-pandemic levels of profit. Like BP, Shell had also taken advantage of its stronger financial position to pare down net debt by US$4.1 billion. And like BP, Shell has also restored its dividend position, raise payouts by 4% after slashing it (though not entirely) in 2020. Chemicals were a particular bright spot in its portfolio, and many Wall Street and City analysts believing that Shell will also resume its share buyback programme – once one of the largest in the world – in 2022, if not earlier.

France’s Total rounded off the European swathe of earnings announcements, which included a restoration to 2019 of net profits for the likes of Equinor, Eni and Repsol. Unlike BP and Shell, which had either halted or reduced dividends throughout the pandemic, Total had maintained its payout over the period. Net profits hit US$3 billion, up 69% y-o-y and above market expectations of US$2.35 billion, driven by the natural gas and power segment, with gas trading also singled out as a bright spot, for the same reasons as BP. With less pressure on Total to up its dividends payout, the French supermajor announced that it would be funnelling cash into new energy projects to fuel its transition into a clean energy powerhouse, just like BP.

On the other side of the (Atlantic) pond, the results were slightly different. Chevron managed to report a net profit of US$1.72 billion, which was lower than Q1 2020 net profits of US$2.45 billion. This was attributed weaker refining margins and the aftermath of the Texas winter storm that affected US supermajors and majors more given their wider footprint in the downstream sector there. Nonetheless, free cash flow was a major bright spot, supporting an increased dividend payout, though that itself was driven by a 43% reduction in capital expenditure as Chevron retreated from its most risky and costly mega projects.

ExxonMobil rounded off this earnings season, with net profits of some US$2.7 billion, a rebound from last year’s first quarter loss of US$610 million. This was probably the most closely watched of all the supermajor results, given the swings that ExxonMobil had taken financial across the Covid-19 pandemic period in regards to asset impairments. Like Chevron, ExxonMobil announced that it had been severely impacted by the Texan winter storm – to the tune of some US$600 million. Unlike BP and Total, ExxonMobil (and Chevron) does not have as strong a trading desk presence in natural gas globally to offset the on-the-ground operational and production losses from the deep freeze. The results are still exemplary though, but pressure will now build on ExxonMobil to restore its share buyback programme that was halted in 2016, especially now that BP has jumped the gun on that area.

All in all, this earnings season will be a relief to the energy industry and its investors. It is proof that the industry has weathered the largest disruption to the global economy since World War II, and is capable to reorganising quickly to bounce back when conditions change. The threat of Covid1-19 is still ever present – particularly with the risk of virus mutations – but for the investors that stuck with the supermajors throughout the crisis, it is time to reap rewards. 

End of article 

Market Outlook:

  • Crude price trading range: Brent – US$68-70/b, WTI – US$64-66/b
  • Global crude oil prices resumed their march towards the US$70/b level, encouraged by strengthening demand from the US, China and Europe, where the Covid-19 pandemic seems to have turned a corner, allowing fuel consumption to flourish again
  • But while major US and European cities are planning a full restoration of all activities by summer, the situation in India is dire, with cases hitting new heights every day; that has pummelled Indian fuel consumption to its lowest level since August 2020, with the political mismanagement by the Modi administration seemingly continuing
  • The rising crude oil benchmarks are indicative that the crude glut built up in 2020 has almost dissipated, which could support a more accelerated approach within the OPEC+ club to restoring production levels back to pre-pandemic levels

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May, 10 2021
U.S. energy imports declined in 2020, while exports remained largely unchanged

Energy exports from the United States exceeded imports by 3.4 quadrillion British thermal units (quads) in 2020, the largest margin on record, according to EIA’s Monthly Energy Review. U.S. energy exports totaled 23.4 quads, nearly equaling the record high set in 2019, and energy imports fell 13% to 20.0 quads, the lowest level since 1992. The United States exported more energy than it imported for the second consecutive year.

Our Monthly Energy Review reports aggregate totals of energy data in different physical units (barrels, cubic feet, etc.) by converting them into common units of heat, measured in British thermal units. The aggregate heat contents of petroleum, natural gas, and coal vary based on the mix of component products being consumed.

U.S. total energy trade

Source: U.S. Energy Information Administration, Monthly Energy Review

Decreases in crude oil and natural gas imports largely drove last year’s change in U.S. energy trade. U.S. crude oil exports have increased every year since 2010 and reached another record high in 2020. In 2020, the United States exported more crude oil—3.2 million barrels per day (b/d)—than any other petroleum product. U.S. crude oil imports fell to 5.9 million b/d, the lowest level since 1991.

Gross exports of natural gas, which have increased every year since 2014, reached a record high of 14.4 billion cubic feet per day (Bcf/d) in 2020. Gross imports of natural gas fell to 7.0 Bcf/d, the lowest level since 1993.

Both U.S. imports and exports of petroleum products declined in 2020: imports by 15% and exports by 5%. Propane surpassed distillate fuel oil as the country’s most-exported petroleum product.

Trade volumes of coal and other fuels account for relatively small portions of U.S. total energy trade. U.S. coal exports, which had increased in 2017 and 2018, decreased in both 2019 and 2020. More information about total energy consumption, production, trade, and emissions is available in our Monthly Energy Review.

May, 03 2021
International Financing for real estate

Do you own a hotel, motel, or bed & breakfast and is in need of some extra funding to give your business the boost it deserves? Our hotel financing program can help out any hotelier who needs capital quickly, without having to go through the long waiting process typically involved with traditional bank loans. Instead of looking at your credit score. We provide anywhere from $10,000 to $2,000,000+ depending on your qualifications, and can get you a hotel loan in just a few days with no collateral. Whether your funding goals are driven by a purchase, a refinance, or construction, our program will give you the extra funds you need to grow your hotel business. We evaluate the amount of cash flow in your business to determine how much you are eligible for. This is a much stronger indicator of your company’s financial health.

Hotel loans and Financing Experience

Obtaining hotel financing is much different than securing a traditional home mortgage. Many of the same factors need to be considered; however, additional factors such as the real estate market itself, the economy, tourism in the area, and several others are also key considerations. Hotel lenders even consider whether the hotel is a flagged or franchised hotel or a non-flagged independent property before offering financing. If you are in the market to finance hotel, consider all of the factors before signing on the dotted line for your hotel mortgage.

Hotel Financing and Mortgage loans

If you are new to the business world or even just purchasing one of your first hotels, you may not be aware of the significant differences between hotel financing and a regular loan or financing option. The goal with securing funding for a hotel is to establish capital in your business. Being that this capital is necessary upfront, many business people have to secure hotel loans to be able to make the purchase outright.

This side of the process is not unlike a typical purchase. The difference comes when hotel lenders evaluate the financial requirements prior to approving a loan. Because you must prove the property’s ability to produce revenue, you must provide additional paperwork and work through additional steps before being approved for a hotel loan. A qualified lender will help you through this process and can assist you much in the same way a lender would with a traditional mortgage.

What Are the Specifics of Hotel Mortgages?

Looking forward to financing/and or purchasing a hotel, you need to be aware of the specific parameters involved with hotel mortgages. A qualified lender will guide you through the process and help you identify all of the specifics you need to successfully obtain hotel funding as quickly and easily as possible.

Depending on the purpose for your hotel loan, whether it is to purchase an existing property, build a new hotel, remodel a dated property, or even to complete hotel refinancing, you’ll need to consider a number of factors. In any case, when looking for hotel finance, you need to be aware of the types of loan products available to you, hotel mortgage rates, stability of the project itself, potential for return on the property, existing hotel equity, and even post-opening costs. Working with a well-established hotel lender can help you take the guesswork out of the process no matter what type of project you are completing.

What Finance Hotel Options Are Available?

Another consideration you’ll need to make when looking for lending options is the type of loans for which your project qualifies. Most borrowers benefit from considering all types of hotel lending options, a process that can be daunting without the assistance of a qualified hotel lending professional. The types of lending options available to most borrowers include:

Conventional Loans

This type of loan is typically offered by a community, regional, or national bank or some non-bank lending agencies. Because conventional loans are not backed by a third party, the credit standards are typically highest for this type of loan and may include higher hotel mortgage rates.

A small business loan or SBA is offered by the Small Business Administration and typically 75% of the loan is backed by the federal government.

SBA Loan

Asset Based Loans — Asset based lines of credit are offered to hotels that can secure financing based on existing assets, such as accounts receivable, existing hotel equity, or established real estate.

Unsecured Credit — This type of loan requires a high level of personal financial aptitude as well as strong cash flow in the business as unsecured credit is not backed by any type of collateral.

Merchant Cash Advance — A merchant cash advance is based on credit card receivables in which the merchant cash provider extends a loan to the hotel based on historical credit card sales.

Seller Financing — In some cases, buyers are able to arrange hotel funding through the hotel seller. This type of loan is negotiated between the buyer and seller.

Whether you are looking for hotel refinancing options or initial purchase hotel loans, the process can be complicated without a supportive and capable hotel lender. We can connect you to that capable lender and make sure that your vision becomes your business.

Real Bridging Finance Ltd
Email: [email protected]

April, 24 2021