HOUSTON, (Reuters) – ExxonMobil and Chevron both beat analyst expectations for quarterly profit yesterday, as soaring refining margins increased earnings from their fuel-making businesses — which typically have smaller profits — to rival the upstream segments.
The results capped off a second straight banner quarter for Big Oil, with sharply higher gasoline and diesel prices during the US-Israeli war with Iran and the war between Russia and Ukraine which have disrupted global energy markets.
Shares of both companies rose nearly 2% yesterday in line with the broader S&P 500 energy index, even as Wall Street’s major indexes fell.
The effective closure of the Strait of Hormuz and recent attacks on refineries in Saudi Arabia and Russia have knocked out fuel-making capacity, sending refining margins sky-high, and Western oil majors’ earnings have boomed.
Shell, TotalEnergies and BP also topped third-quarter profit estimates this week. BP reached a record.
For the first time in at least six years, Exxon, the largest US oil producer by market capitalization, has been earning more from refining than from exploration and drilling. Chevron’s third-quarter downstream earnings also reached their highest point over the same time frame.
Fuel-making margins should return to more normal levels when conflicts end and damaged refineries are repaired, but that will take time, executives from both companies said.
“Margins will stay a bit elevated, maybe into next year,” Chevron Vice Chairman Mark Nelson said during a conference call with analysts.
INCREASING FUEL SUPPLIES
Exxon is investing more in its refineries, including at its Baytown complex in Texas, to increase fuel production, and has leaned on its trading team to direct supplies to where they are needed globally, Chief Financial Officer Neil Hansen said in an interview.
“It’s important to acknowledge that these higher fuel prices put real pressure on families and businesses,” he said. “The most meaningful response … that we can offer as a company is to pull every lever that’s available to us to increase supply.”
Distillate production in the US will grow by another 100,000 barrels per day through the refinery investments, the company said, without giving a timeline.
Exxon CEO Darren Woods said the company is looking for more ways to expand its existing refining facilities, along with upgrading them to produce more fuels or chemical feedstocks.
The high cost of diesel and gasoline is among voters’ biggest frustrations ahead of Tuesday’s US midterm elections.
Chevron has opportunities to increase efficiency at its US Gulf refineries and could grow capacity by 7% at its Pascagoula refinery in Mississippi by the end of the decade, Chief Financial Officer Eimear Bonner told Reuters in an interview.
Exxon reported third-quarter adjusted earnings per share of US$4.23, while Chevron earned US$5.28 in adjusted per-share profit.
US AND EUROPEAN OIL FIRMS DIVERGE ON RAISING SHAREHOLDER RETURNS
The two US oil majors are using the cash windfall to pay down debt and strengthen their balance sheets instead of significantly raising dividends or buying back more shares.
Meanwhile, Shell said its strong results would allow it to raise buybacks over the next three months to US$5 billion, up from US$3 billion in the preceding quarter. TotalEnergies will consider issuing an extra dividend next year if annual cash flow reaches US$43 billion, CEO Patrick Pouyanne said on Thursday.
UK oil producer BP plans to put higher earnings toward slashing liabilities, including an early repayment of its outstanding US$5 billion post-tax bill for the 2010 Deepwater Horizon disaster that killed 11 people.
Exxon reduced debt by US$8 billion during the third quarter, Hansen said, adding it planned to stick to its approach of maintaining and growing its dividend over the long term. The company raised its fourth-quarter dividend by 4 cents from the previous quarter.
Chevron has cut net debt by nearly US$14 billion from the end of 2025.
“We think in decades, not quarters,” Bonner said. “We need that (strong) balance sheet through high prices and low prices.”
The spot price of benchmark Brent crude swung from as low as US$68 per barrel to a high of US$132 during the market’s volatile third quarter, she said.
Exxon said it would repurchase US$20 billion worth of shares in 2027, the same level as in the previous two years.
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