(Bloomberg) — Exxon Mobil Corp. and Chevron Corp. amassed more than US$30 billion in combined net income as politicians blast Big Oil for raking in massive profits at a time when consumers are struggling with soaring inflation and energy shortages worldwide.
Exxon posted the highest profit in its 152-year history, while Chevron announced its second-best quarterly result as natural gas demand and prices surged. Those earnings follow strong results posted by European peers Shell Plc and TotalEnergies SE earlier this week.
Even as the supermajors bask in profits unimagined just two years ago during the darkest days of the pandemic, oil executives are under pressure by government leaders to ease prices at the pump for consumers and cut global-warming emissions. Meanwhile, shareholders have been demanding higher returns and an end to costly exploration programs, adding to commodity-price pressures.
“We recognize the pain that high prices cause,” Exxon Chief Executive Officer Darren Woods said during a conference call with analysts. “Unfortunately the market we’re in today is a function of many of the policies and some of the narrative that’s floated around in the past.”
Woods warned that policies like windfall-profit taxes may “solve a political problem” in the short term but contain “significant long-term negative consequences” for the global energy system.
The strength of the American oil industry’s earnings come in stark contrast to tech giants that supplanted them atop of the S&P 500 Index for much of the past decade. Commodities produced from wells, refineries and chemical plants are not only more resilient to inflation and recession than the ad-based revenues of Alphabet Inc. and Snap Inc.
For Exxon, third-quarter per-share profit of US$4.68 exceeded US$3.89 median estimate from analysts in a Bloomberg survey. Net income of US$19.7 billion surpassed the all-time high of US$17.6 billion amassed during the second quarter.
Exxon bucked the trend of weaker refining earnings, benefiting from record crude-processing in North America and high diesel demand. In Europe, a continent-wide scramble to stash natural gas ahead of winter swelled the prices Exxon received for the fuel by 22%, more than offsetting the pain from a 12% drop in what the company fetched for crude.
The explorer also lifted output in key oil zones such as the Permian Basin and Guyana, where combined production reached the equivalent of 920,000 barrels a day during the quarter.
Expectations among analysts rose after Exxon’s Oct. 4 trading statement said that robust natural gas prices more than offset a dip in crude markets. The strong earnings streak is expected to continue through the current quarter; Exxon is forecast to post full-year profit in excess of $50 billion — more than Amazon.com Inc., Procter & Gamble Co., and Tesla Inc. combined.
Meanwhile, Chevron’s third-quarter earnings of $5.56 per share surpassed the median $4.94 forecast among analysts in the Bloomberg Consensus. Net income was $11.2 billion, down slightly from the all-time high of more than $12 billion in the prior three months, according to a company statement on Friday.
Chevron is reaping a massive free cash flow bounty amid the surge in oil & gas prices and strict capital discipline. We expect that to continue, supporting more cash to be directed at growth and buybacks.
“We delivered another quarter of strong financial performance with return on capital employed of 25 percent,” Chevron CEO Mike Wirth said in the statement. “At the same time, we’re increasing investments and growing energy supplies, with our Permian production reaching another quarterly record.”
The sheer size of the combined profits — equivalent to roughly US$14 million an hour — is sure to amplify criticism from US President Joe Biden and other leading Democrats about profiteering, particularly as war rages on in Ukraine. Biden already has singled out Exxon and Shell and the latest profit reports come little more than a week before Americans head to the polls.
Still, US oil supermajors are suffering less political whiplash than their European peers, which are subject to windfall profit taxes and greater calls to invest in low-carbon energy, despite some of the world’s biggest profits still being rooted in fossil fuels.
Exxon’s stock rose 2.6% at 9:33 a.m. in New York. Chevron advanced 2.7%.
In recent weeks Exxon has overtaken Facebook parent Meta Platforms Inc. in market value and is now back in the S&P 500 Index’s top 10 stocks for the first time since 2019. The shares touched a record high this week and have soared more than 70% this year as high oil and gas prices combined with more modest capital spending.
Shareholders have been the main beneficiaries of Exxon’s post-pandemic comeback. At the beginning of the year, Woods reactivated share repurchases that had been on hold for more than half a decade. The $15 billion-a-year buyback program is about the same cash outlay as Exxon’s dividend, already the second-largest in the S&P 500 Index.
Despite the windfall from high energy prices, Woods has locked long-term spending at about US$22.5 billion a year — 30% below pre-Covid levels — with production growth from Guyana and the Permian Basin largely offsetting asset sales and natural field declines elsewhere. Woods set a goal of lowering breakeven costs to the equivalent of about US$30-a-barrel by 2027, down from US$41 in 2021.
