Oil and gas companies began reporting their earnings yesterday, and after one day, the tally was one bankruptcy, one company gobbled up in a merger and one company with a $1.8 billion revenue drop from last quarter.

Taken together, the results show the industry is still waiting to recover from the coronavirus pandemic, which slashed demand for energy and pushed oil prices to record lows.

Halliburton Co., the biggest U.S. provider of hydraulic fracturing services, reported $46 million in net income in the second quarter of 2020 yesterday, excluding accounting changes of $2.1 billion. While that beat analysts’ estimates, it came with a note of caution.

Halliburton’s revenue dropped from $5 billion in the first quarter to $3.2 billion in the second quarter, and the company eked out a profit by slashing costs — including laying off employees. CEO Jeff Miller said the price of West Texas Intermediate crude is range-bound around $40 a barrel, and he didn’t expect the market for drilling and fracking to recover this year.

“I would not characterize this as the start of a meaningful recovery,” he said of the results. “We believe the rig count should find a bottom sometime in the third quarter, but a meaningful inflection point in drilling seems further out.”

Energy service companies like Halliburton can be a bellwether for the sector because they work with dozens of production companies across the country and around the world.

A rival service company, BJ Services LLC, announced yesterday it was filing for Chapter 11 bankruptcy protection, citing the pandemic as a key influence. BJ Services, which was formed when Baker Hughes Co. spun off part of its business in 2016, said in a court filing it had debts between $500 million and $1 billion.

“Despite maintaining a leading market position and strong client support, the severe downturn in activity and subsequent lack of liquidity resulted in an unmanageable capital structure,” said Warren Zemlak, the company’s president and CEO, in a statement.

Chevron makes a deal

Even a $5 billion takeover announcement yesterday also came with a note of caution. Chevron Corp., the second-biggest U.S. oil producer, announced it will acquire Noble Energy Inc. in an all-stock transaction worth $5 billion, or $13 billion including assumed debt.

Noble, based outside Houston, has lost money three of the last four quarters. It has acreage in the Permian Basin, where Chevron also drills, but its main asset is a giant gas field in the Mediterranean Sea between Israel and Cyprus. The company has been working to develop the field for about a decade and recently finalized a deal to ship the gas to Europe through a subsea pipeline.

But Noble has struggled during the oil downturn — it lost $4 billion on $1 billion in revenue in the first three months of this year.

Chevron, based in San Ramon, Calif., said its offer is worth $10.38 per share, which is 12% above Noble’s average stock price for the previous 10 days.

That’s a far cry from last year, when Chevron offered to buy Anadarko Petroleum Corp. for a 37% premium to its share price. The company was ultimately outbid by Occidental Petroleum Corp., which offered an additional 20% hike (Energywire, May 7, 2019).

The lower relative valuation is a sign that smaller oil companies should focus on reducing their debt and boosting their cash flow — they’re unlikely to get rescued from the downturn by a rich buyout offer, said Rob Thummel, a manager at Tortoise Capital Advisors, an energy-focused investment firm.

“That’s probably a better plan than to have the expectation that one of these large [integrated companies] is going buy you out,” he said. “Most of the majors have said, ‘We’re focused on capital discipline.'”