ExxonMobil and Chevron smashed profit records in the second quarter as the energy price hike following Russia’s invasion of Ukraine delivered windfall gains for US oil giants.
The huge gains come as consumers are reeling from rising fuel costs that have helped drive inflation to levels not seen in decades across the United States and Europe, threatening a political backlash against energy companies.
Exxon’s second-quarter net profit was $17.9 billion, topping analysts’ estimates of $16.9 billion, according to data compiled by S&P Capital IQ. The company’s previous record quarterly profit was $15.9 billion in 2012, another year of high oil prices.
Chevron’s second-quarter profit came in at $11.6 billion, which is also its highest quarterly profit and easily exceeded consensus estimates of $9.9 billion.
“Profits and cash flow have benefited from increased production, increased realization, and tighter cost control,” said Darren Woods, Exxon CEO.
The huge profit came after UK-based Shell on Thursday reported a record-breaking quarter for the second time in a row, with an adjusted profit of $11.5 billion. France’s TotalEnergies said on the same day that earnings for the quarter jumped to $9.8 billion, nearly tripling at the same time a year ago.
Together, the five major Western oil companies – Exxon, Chevron, Shell, BP and Total Energy – are on track to post profits of more than $50 billion in the three months to the end of June.
Italian rival Eni on Friday also reported bumper quarterly results, boosting investor returns after a fourfold year-over-year increase in adjusted net profit to 3.81 billion euros.
Exxon and Chevron’s “downstream” oil refining businesses drove their results higher after profit margins from selling refined fuels above the cost of purchasing crude oil exploded to record levels.
In the United States, the national average gasoline price jumped to a record high of more than $5 a gallon in June, although it has fallen since then.
The cash bonus for oil majors has sparked attacks from politicians and led to increased calls for an unexpected tax on profits, which companies in the UK and elsewhere are facing. US President Joe Biden said last month that Exxon makes “more money than God” and promised to “make sure everyone knows Exxon’s earnings.”
Exxon and Chevron have responded by saying they are increasing spending on new supply to help meet rising demand. However, their capital spending is still significantly lower than it was before the pandemic, and they have prioritized increasing dividends and share buybacks.
Woods touted the company’s production growth in the US Permian shale oil and gas fields in Texas and New Mexico, which Exxon said increased 130,000 barrels of oil equivalent per day compared to the first half of 2021.
Pierre Breper, Chevron’s chief financial officer, said he expects the company to raise spending next year as the company responds to increased demand.
Our budget this year is about $15 billion and our guidance to 2026 is between $15 billion and $17 billion annually, and that gives us $2 billion of room to increase. . . You should see higher capital than us in 2023,” he said, referring to the Permian region as an area likely to have increased production.
Exxon’s quarterly revenue increased 71 percent year-over-year to $115.7 billion, while Chevron’s revenue rose more than 80 percent to $68.8 billion. Exxon shares jumped 3.5 percent to $95.89 early Friday, while Chevron shares rose 7.1 percent to $161.04.
The outlook for oil majors has turned bleak in recent weeks as central banks around the world rapidly raise interest rates to combat inflation, in large part due to the effects of skyrocketing energy prices, raising fears of a global economic slowdown.
The broadening of economic concerns led to a big sell-off in oil and gas stocks even with expectations of bumper profits, despite the fact that their prices continued to rise during the year and outperform the market.
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