Profits at ExxonMobil and Chevron fell in the third quarter as lower commodity prices and weaker refining margins outweighed the US oil groups’ soaring production, mirroring hits to their European rivals.
Exxon, the biggest western oil company, posted net income of $8.6bn on Friday, down 7 per cent on the same period a year ago. Chevron, the second biggest, made $4.5bn, 30 per cent below last year.
After bumper performances in 2022 and 2023, the US oil companies’ bonanza waned this year, driven by drops in oil and gas prices and lower margins converting crude to petrol and other products.
“It’s oil, but it’s also refining margins, which were extraordinarily strong in the third quarter last year and not very strong at all in the third quarter this year,” Chevron chief executive Mike Wirth told the Financial Times.
Kathy Mikells, Exxon’s chief financial officer, echoed those comments. “The largest single factor that we would have seen year over year is just industry price margins?.?.?.?especially both in terms of gas prices and refining margins, coming off of historical highs,” she said.
The US duo’s results followed a similar trend to their European counterparts, which reported earnings earlier in the week.
BP notched its lowest quarterly profit since the Covid-19 pandemic, while France’s TotalEnergies posted earnings at a three-year low. Shell’s results were cushioned by its booming liquefied natural gas business.
Industry profits surged to record levels in 2022 as Russia’s full-scale invasion of Ukraine sent oil and gas prices soaring and bolstered refining margins. They declined in 2023 but remained elevated.
This year, US natural gas prices have slumped to historic lows amid an ongoing supply glut. Global crude prices have also been dragged down by weak demand and lacklustre economic growth, especially in China, one of the world’s biggest consumers.
Wirth said that if Chinese demand remained soft and Opec brought supply back online as planned, there would continue to be “downward pressure on prices” in the near term.
Despite the comparative profit weakness, earnings at Exxon and Chevron beat Wall Street expectations as the companies slashed costs and raised production, especially in the Permian Basin of Texas and New Mexico, the biggest US oilfield.
That helped drive US crude output to a record 13.4mn barrels a day in August, according to data released this week by the US Energy Information Administration.
Exxon’s shares rose 2 per cent in early trading in New York, while Chevron’s jumped almost 5 per cent. Exxon reported revenues of $90bn, down by 1 per cent on last year. Chevron took in $51bn, down 6 per cent.
Exxon also continued to increase output at its lucrative development off the coast of Guyana. It remains at loggerheads with Chevron, which has sought to buy into the venture through its $53bn acquisition of Hess.
Exxon has claimed it has a right of first refusal over Hess’s stake in the project and launched arbitration proceedings. The case is set to be heard next year.
Both companies continued to plough cash back to investors through dividends and share buybacks. Chevron returned a record $7.7bn to shareholders during the quarter, while Exxon returned $9.8bn and unveiled a dividend increase to continue a 42-year streak of raises.
The industry’s ability to continue to shower shareholders with returns in a weaker price environment has come under scrutiny. BP indicated on Tuesday it would “review” its plans for 2025 share buybacks in February.
