Its now just days before the start of Q1 earnings releases and guidance updates for energy companies. And the only thing that’s clear is the numbers will be considerably worse than what we saw in Q4.
Falling commodity prices are of course the chief catalyst for bad news, with oil down by nearly two-thirds since the beginning of the year and natural gas lower by around 25 percent. Producers feel that in lower selling prices, forcing sharp cutbacks in activity. Midstreams see it in reduced system volumes, customer bankruptcies and renegotiated contracts.
The hit to energy demand from COVID-19 fallout is straining refiners, with companies cutting rates and in some cases shuttering facilities. “Stay at home” orders are hitting demand for everything from gasoline to jet fuel, hammering fuel distributors. And large industrial and commercial consumers are unable to benefit from low fuel prices, as facilities are shuttered for safety and increasingly economic reasons as the recession starts to bite.
Small wonder then that most energy companies haven’t updated guidance in the days leading up to earnings. That means a high probability of surprises when numbers come out the next few weeks.
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Elliott and Roger on Nov. 30, 2020
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