What to Watch

Shell Triples Profit in 2017

 British-Dutch oil giant Royal Dutch Shell PLC more than tripled its profit in 2017 on the back of rebounding crude oil prices, reports The Wall Street Journal’s Sarah Kent.

Profit on a current cost-of-supplies basis—a figure similar to the net income U.S. firms report—was up to $12.1 billion, compared with $3.5 billion in 2016.

However, the company’s closely-watched cash-flow from operations fell 21%, to $7.3 billion in the fourth quarter of last year, falling short of analysts’ expectations.

“Investors have watched oil-company cash-flow numbers closely since oil prices crashed in 2014, using them as a sign of a company’s financial toughness,” Ms. Kent writes.

Energy News

Oil Prices Tick Up

Crude oil prices rose Thursday morning on the back of an unexpected decline in U.S. gasoline inventories.

Brent crude, the global oil benchmark, rose 0.9% to $69.54 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.9% at $65.28 a barrel.

Brent crude neared the more than three-year high of $71.28 a barrel hit on Jan. 25 after the U.S. Energy Information Administration published data on Wednesday showing gasoline stockpiles fell by 2 million barrels.

China Develops Nuclear Powerhouse

China is recombining two of its largest nuclear-power companies in a megamerger that would create an enterprise with assets of about $100 billion, reports The Wall Street Journal’s Wayne Ma.

China’s state-asset regulator said Wednesday it had approved the merger of China National Nuclear Corp. and China Nuclear Engineering and Construction Group, part of a broader effort to shore up the country’s state-owned firms.

Investors Push for Overhaul at Marine Fuel Group

 A group of U.S. hedge funds and other investors are lobbying for a restructuring at U.S.-listed Aegean Marine Petroleum Network Inc. following “chronic failures in corporate governance” that have aided a 90% drop in the stock’s value since 2008, reports The Wall Street Journal’s Laurence Fletcher. The company is the world’s biggest independent supplier of physical marine fuel.

WSJ Energy In-Depth

Big Oil Is Drilling Again, on a Budget

 Big oil companies are returning to big offshore drilling investments, with 30 major new projects expected to launch this year, even as they work on much tighter budgets than in the past, Sarah Kent reports.

The industry had put on hold significant investments since oil prices crashed just over three years ago. Prices have rallied since mid-2017 but are still far from the $100-a-barrel days that drove over-budget megaprojects ahead of the price crash in late 2014.

“New projects must be able to compete with shale developments in the U.S., whose cost dropped faster than elsewhere in the industry and which have lured many companies with the promise of swift returns,” Ms. Kent writes.

Big Number

$12.1 Billion

 Royal Dutch Shell PLC said Thursday that its profit had more than tripled in 2017, rising to $12.1 billion.

FutureCurve

Friday: Baker Hughes releases weekly data on the number of rigs drilling for oil in the U.S.

Tuesday: The American Petroleum Institute issues its weekly forecasts on U.S. crude inventories.

Wednesday: The U.S. International Energy Administration releases official weekly data on U.S. crude stocks.

Reporter’s Notebook

Wall Street Journal reporter John Wu on China’s power sector.China’s power producers could suffer bigger net losses in the first quarter of 2018 without meaningful tariff hikes and/or coal price declines, Goldman Sachs says. The latest profit warnings from the three utility firms–Datang, Huadian and Huaneng–again highlight their financial vulnerability to rising coal costs, explains the bank. Fishing for a bottom is still risky, it warns, with China Resources Power the only utility it rates as a buy.

Wall Street Journal reporter Dan Molinski on U.S. oil output. The EIA’s monthly report on U.S. oil production shows output surpassed 10 million barrels per day in November, up from 9.7 million in October and the first time since November 1970 that it’s reached into the double digits. The report pegs November output at 10.038M bpd, just a tad less than that November 1970 record of 10.044M. The report highlights a strong rebound for the U.S. oil industry, which saw output fall to as low as 8.6M bpd by September 2016 during a downturn that followed a collapse in oil prices. The U.S. shale industry is largely responsible for the rising oil output, especially in the Permian Basin of West Texas.