Oil prices rebounded sharply during the first quarter. That could have a noticeable impact on the bottom lines of oil producers. However, not all will benefit in the same way, which is something investors should keep an eye on. In this segment from Industry Focus: Energy, host Nick Sciple and Fool.com contributor Matt DiLallo discuss:

  • The surge in oil prices this year.
  • Two numbers to watch at Hess (HES 0.45%) this quarter.
  • ExxonMobil's (XOM 0.39%) potential downstream problem.
  • ConocoPhillips(COP 0.39%) recent asset sale and numbers to watch this quarter.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

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This video was recorded on April 18, 2019.

Nick Sciple: Let's move on and talk about the companies that we want to take a look at their earnings, preview them. First off, let's talk about Hess. Hess, we've talked about this company in the past on the show. They've been allocating a lot of their capital to their two big plays -- the Bakken shale play as well as Guyana. They're partnering with Exxon. As we look at to Hess' first-quarter results, what should investors be looking for from the company?

Matt DiLallo: Hess has done a really good job of surprising analysts with stronger-than-expected profits. Analysts actually see them losing money this quarter. I think it's a penny less than what they earn in the fourth quarter. Oil prices have exploded. So I would expect them to beat the estimates again. That could boost their stock price, even though their stock has been crazy this year.

The other thing I would keep an eye on is what they're doing in the Bakken. They ramped up their drilling. They see production coming in between 130,000 and 135,000 barrels a day. That's up from 126,000 last quarter. I would anticipate that to be at the high end. If it's not, then that could cool down their stock.

Sciple: Something to watch. Hess, of a lot of these smaller, pure-play E&P folks, is one of the most interesting. Their assets -- we mentioned when we talked about them on the podcast before, really strong assets position in the Bakken and Guyana. We'll see how they play out. Definitely a company to continue watching.

Let's also talk about their partner in Guyana, which is ExxonMobil. One of the largest publicly traded oil companies in the world. Exxon has really been allocating a lot of cash to the Permian. They're one of the largest players there, a big part of their strategy they've laid out to double earnings and cash flow over the coming years. As we look out into Exxon's upcoming earnings results, what should investors be looking for from that company?

DiLallo: There's usually two things that are the calling card for ExxonMobil. The first one's production. They're so big, they have trouble growing production sometimes because oil and natural gas wells naturally decline. It's really hard to keep up with that decline rate, especially for companies like Exxon. They're around four million barrels per day last quarter. If they can keep that up or grow production, that'll be a good sign. They've struggled a lot in the past and that's weighed down their stock price.

The other thing is downstream, which is refining chemicals and those businesses. They benefit from lower oil prices, and it's a headwind when oil prices rise because they consume oil. What was a big boon for them in the fourth quarter could be a headwind in the first quarter because oil prices rose. So I would keep an eye on downstream earnings. I'm not as optimistic about Exxon reporting a good quarter as I am for a company like Hess or ConocoPhillips because of that downstream exposure.

Sciple: Right, the nature of being a fully integrated oil company. They have different exposure, rather than just oil prices go up, profits go up. It's a more complicated business.

Let's move on and talk about ConocoPhillips. Of the three we're going to preview earnings for, just because of the news we got this morning, is probably the most interesting one. As I mentioned this morning, ConocoPhillips announced a deal with Chrysaor Holdings to sell a package of North Sea oil assets for $2.68 billion. Matt, this news came out this morning, but instant reaction, what are your thoughts on this deal and what it means for ConocoPhillips moving forward?

DiLallo: Yeah, they've been selling noncore assets for several years. This one's been on the market for a while. They tried to sell it earlier this year, and that deal fell through. It's no surprise to see them eventually selling it. This is a higher-cost oil play out there in the North Sea, not as much growth. They're going to take that money and probably use it to buy back stock or maybe they'll even boost their drilling program this year. Their focus is on shale, Alaska, things that have really low costs. This is just part of their strategy.

Sciple: Yeah. You mentioned the low cost. I mentioned earlier that ConocoPhillips has really positioned themselves to thrive at lower oil prices. They called out that $40 number as where they're looking for for breakeven. As we push oil prices up closer to $60, you would expect them as we look into the first quarter to have a meaningful boost in profits. As we look out at those first-quarter results, what should investors be looking for? What are the things we should definitely pay attention to when we get their earnings out?

DiLallo: Yeah, production's a big one for them. They've got some turnaround issues. Turnaround is when they do maintenance on some of their big facilities. There's some of that coming up. Production's actually on track to decline a little bit from the fourth quarter. However, the company has a history of underpromising and overdelivering. That's because shale wells have gotten so productive that companies have been able to just drill much more productive wells than they were expecting. I'm optimistic that they're going to hit the high end of that. That should enable them to beat earnings expectations again. The consensus estimate was $0.84, which is below last quarter, even though oil prices are higher.

One thing with ConocoPhillips, they've done such a good job reducing their costs that they made more money in last year's third quarter than they did in 2014, when oil was over $100 a barrel. This is a much more profitable oil company than it has been. They're continuing to make waves in that. They're using all those profits to buy back shares. They're really creating a lot of value for shareholders.

Sciple: They were the top-performing oil stock in 2018. Total return over 15%. Haven't moved nearly as much this year. But again, as you mentioned, positioning themselves to succeed at lower oil prices, with oil prices helping them by moving on up. Really seems to position ConocoPhillips in a strong way moving forward.