It's proving to be a difficult earnings season for oil companies as low prices for crude are sapping profits and pushing many into the red for the first quarter.
Analysts expect Murphy Oil Corp. of El Dorado will see its profits squeezed by low crude prices, with some predicting the company will report a loss when it releases its quarterly financial results next week.
Energy firms -- both large and small -- are posting between a 50 percent and 60 percent decline in earnings for the first part of the year, said Rob Lutts, president and chief investment officer for Cabot Wealth Management.
"It's following crude down," he said about earnings for the energy sector, which makes up about 9 percent of the Standard & Poor's 500 stock index.
"The other 91 percent of the stock market is benefiting and doing well because the United States is the largest consumer of energy, and when you drop the price of energy, we benefit quite a bit," Lutts said.
Oil prices have declined more than 50 percent since mid-2014 as a result of a global supply glut and weak demand.
Prices have rebounded a bit since West Texas Intermediate crude fell to prices nearing $40 a barrel in March.
But whether oil's rout has ended is debatable. Some analysts say crude prices have hit a bottom, while others say oil could fall further.
"Obviously we've had some kind of bounce off the bottom," said James Sullivan, an analyst with Alembic Global Adivsors. "But the question is how sustainable that is going to be."
The market remains volatile as a result of geopolitical tensions in the Middle East, particularly regarding war in Yemen, and the continued buildup of crude stores in the United States.
On Wednesday, Brent crude rose 65 cents to close at $62.73 a barrel on the ICE Futures Europe exchange in London after renewed airstrikes by a Saudi Arabia-led coalition against Shiite rebels in Yemen.
West Texas Intermediate crude fell 45 cents to $56.16 a barrel on the New York Mercantile Exchange.
As a result of the drop in crude prices, Raymond James and Associates expects Murphy Oil to report a loss of 64 cents per share for the first quarter.
That's down from an adjusted earnings of 96 cents per share during the same quarter in 2014.
"It's going to be a messy quarter," said Carlos Newall, equity research associate for Raymond James.
Like other energy firms, Murphy Oil has responded to prices by cutting investments and idling drilling rigs. The company plans to spend 33 percent less this year and has reduced the number of rigs it operates in the Eagle Ford Shale in Texas.
The company's stock is down almost 5 percent this year. Shares of the company closed at $49.27 on Wednesday.
The company is to release its 2015 first-quarter financial results on Wednesday.
Oil field services companies Halliburton Co. and Baker Hughes Inc. have already reported losses for the first quarter of 2015. Other energy firms will release their earnings in the coming weeks.
Halliburton of Houston on Monday reported a loss of $643 million, compared with a $622 million profit last year. Halliburton is planning to acquire Baker Hughes.
Baker Hughes Inc. on Tuesday reported a loss of $589 million for the first quarter, down from a profit of $328 million during the same period in 2014.
Baker Hughes also said it cut its workforce by 17 percent -- about 10,500 positions -- 3,500 more jobs than previously announced.
A spokesman for the Houston-based company did not respond to questions about how many employees Baker Hughes has in Arkansas and whether they will be affected by the layoffs.
An email statement from Baker Hughes said severance benefits, including outplacement services and continued health benefits, will be provided for employees who have lost their jobs.
"It shows that the price drop does have consequences," said Phil Flynn, an energy analyst with Price Futures Group. "When prices crash, energy companies have a hard time making money."
Business on 04/23/2015