In the last Energy Letter, I covered the most recent results from ConocoPhillips (NYSE: COP), highlighting the fact that the company is shoring up its defenses against a protracted period of low oil prices. Today I would like to highlight results from the super major integrated oil companies BP (NYSE: BP), ExxonMobil (NYSE: XOM), Royal Dutch Shell (NYSE: RDS.A) and Chevron (NYSE: CVX).

ExxonMobil once again showed why it is the bellwether of the bunch, reporting the best earnings of the group. For Q4 2015, XOM reported earnings of $2.78 billion, versus $6.57 billion for Q4 2014. The $0.67 per share of earnings slightly beat consensus estimates of $0.63 cents per share.

Upstream earnings were of course terrible as expected, coming in at $857 million in Q4, down $4.6 billion from Q4 2014. But the upstream sector was only positive because of international production. U.S. upstream lost $538 million for the quarter. Downstream earnings benefited from favorable refining conditions, growing to $1.4 billion from $854 million in Q4 2014. The company’s worldwide net barrels of oil equivalent (BOE) production climbed to 2.48 million BOE per day in Q4 from 2.18 million in the prior-year quarter.

For the year, ExxonMobil earned $16.2 billion, down 50% from $32.5 billion in 2014. Oil-equivalent production increased 3.2% from 2014, with liquids up 11% and natural gas down 5.7%. Capital and exploration expenditures were down 19% for the year to $31.1 billion, and the company expects a further 25% decline this year in that category to $23.2 billion.

Royal Dutch Shell bounced back from a $7.4 billion loss in Q3 2015 caused largely by asset writedowns. Q4 net income was $939 million, up 58% from $595 million in Q4 2014. But that is a misleading comparison, because Shell took a $3.6 billion adjustment a year ago.

Shell’s oil and gas production for Q4 was 3.04 million BOE/d, a decrease of 5% from a year earlier. Full year 2015 oil and gas production was 2.95 million BOE/d, a decrease of 4% from 2014. Unlike ExxonMobil, which has yet to release year-end reserves numbers, Shell noted the impact of lower prices on its proved reserves.  Shell said its reserves replacement ratio was minus 20% for the year, which was the first time that ratio has been negative since 1999. The company failed to replace any of the 1.1 billion BOE it produced in 2015, and wrote off another 200 million barrels because of the drop in oil prices.

Given that for most of 2015 BP was still dealing with the fallout from the Deepwater Horizon oil spill at the BP-operated Macondo prospect, and considering the plunge in oil and natural gas prices, it probably isn’t a surprise that the company posted big losses. Profits for Q4 2015 totaled $196 million, falling far below the consensus estimate of $815 million. For the year BP’s net loss was $6.5 billion — its largest loss in at least three decades.

Production for Q4 2015 was 3.4 million BOE/d, compared with 3.2 million BOE/d for the same period in 2014. Reported production for the full year was 3.3 million BOE/d, compared with 3.2 million BOE/d in 2014. BP’s reserve replacement ratio was at 61% of the oil it produced in 2015.

BP currently isn’t earning enough to fund its dividend, but it is cutting expenditures to attempt to rectify that. The company’s capital spending has dropped from $23 billion in 2014 to $19 billion in 2015, and it said it expects to spend $17 billion to $19 billion a year through 2017. But BP is basing its forecasts on oil at $60 per barrel. If oil were to average $40/bbl over the next three years, the company would have to cut capital spending to about $14 billion a year in order to balance its books.

Chevron reported a loss of $588 million for fourth quarter 2015, compared with earnings of $3.5 billion in the 2014 fourth quarter. It was the first quarterly loss reported by the company in more than 13 years. For the year Chevron reported earnings of $4.6 billion compared with $19.2 billion in 2014.

Chevron’s production was 2.67 million BOE/d in Q4 2015, up from 2.58 million BOE/d in Q4 2014. For all of 2015 production was 2.62 million BOE/d, an increase of 2% from 2014. The company did report that it found more oil than it produced, with a reserves replacement ratio of 107%.

Like ConocoPhillips before it, Chevron has promised to maintain the dividend at all costs. Of course COP ended up breaking that promise, but Chevron has deeper pockets and can sustain these low prices for longer. Still, it’s aggressively cutting spending. Capital and exploratory expenditures in 2015 were $34 billion, down from $40.3 billion in 2014. The company expects to further cut those expenses to $26.6 billion this year.

Conclusions

In closing, I want to emphasize that not all losses are created equally. In order to weigh them properly I am going to have to dig into the annual reports as they come in. If a loss is disproportionately large due to one-time impairments, that’s much less significant than if it’s a systemic issue caused, for instance, by excessive leverage. We will have more on this over the next few issues.

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