What's going on?

Two major oil companies reported their earnings on Friday � both were pretty dismal due to the low oil price (versus one year ago)… but it�s not all bad news.

What does this mean?

ExxonMobil, the world�s largest publicly traded oil company, saw its profit fall 63% to the lowest level since 1999. But Exxon is quite conservative in its approach to things: for example, its debt, as a proportion of its size, is quite low. Also, its income is somewhat diversified. It�s still actually making a profit�partly because it doesn�t just drill for oil, it also makes chemicals used in things as diverse as automobile parts and polyester clothing.

Chevron, the second largest US oil company, lost more money than investors were expecting. It�s viewed as more exposed to the actual price of oil than Exxon because it made some big investments in new oil fields in the years prior to the oil price crash and is still increasing its oil production.

Why should I care?

For the stock: Energy stocks have benefitted big time from the higher oil price. The oil price was up 20% for the month and is now up 75% since a 13-year low was hit in February. Unsurprisingly, this has helped the stock prices of energy companies. Big companies, like Exxon and Chevron, have certainly benefitted, but smaller, riskier ones (like Chesapeake Energy) have seen the most relief (they�re now less likely to go bankrupt!).

The bigger picture: Banks are also loving it. Back in February, there were fears that banks were facing big losses on loans they had made to energy companies because those companies were unlikely to�be able to repay their loans with the oil price so low. The higher oil price alleviates much of that pressure � as long as it doesn�t collapse again!