What's going on?

Boo Exxon, hiss Chevron: the two oil giants reported weaker-than-expected earnings on Friday, and investors eagerly gave their shares a bad review.

What does this mean?

The average price of an American barrel of crude oil during the second quarter was $28. A year ago, it was closer to $60. The slump � caused by, among other things, a demand-sapping pandemic and the Russia-Saudi Arabia price war � ultimately meant oil companies earned less selling the slippery elixir while spending as much as they normally would to extract it. Understandable, then, that analysts expected once-profitable oil firms to swing into a loss last quarter.


Exxon and Chevron duly delivered. Despite lowering its oil production, the former reported a quarterly loss for the second time in a row � one that was worse than investors had braced for, and its biggest in recent history. And after Chevron revised the value of some of its assets lower, it likewise turned in a worse-than-expected loss.

Why should I care?

The bigger picture: Protect the payouts.

Exxon�s stock initially fell by 2% and Chevron�s by 4%, but things could�ve been worse: both companies have so far managed to safeguard the dividends they regularly pay shareholders. That wasn�t the case over in Europe on Friday, where Italian oil company Eni cut its payout when it reported a second-quarter loss. The situation doesn�t bode well for European giants Shell and BP�s updates this week � especially considering BP�s already said it�s considering �scrip� dividends.

Zooming in: Pick your poison.

The oil company segment hit hardest by low prices is its �upstream� business, which finds and extracts the earth-juice. But given the dramatic swings in its price last quarter, oil companies with a major trading arm might�ve been able to partly balance out those losses � taking advantage of oil�s volatility to pocket at least some profit.