Big Oil's Profits Soar in Third Quarter

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Third-quarter earnings for four large integrated oil and gas supermajors zoomed upward in the just-completed third quarter, reflecting strong demand, supply constraints, high prices and cost reductions that improved margins.

Four oil supermajors--ExxonMobil Corporation (NYSE:XOM) (Irving, Texas), Chevron Corporation (NYSE:CVX) (San Ramon, California), Shell plc (NYSE:SHEL) (London, England) and BP plc (NYSE:BP) (London)--posted net earnings totaling about $46 billion for the three months ended September 30, 2022. By contrast, their year-earlier quarterly combined earnings were about $16 billion.

Click on the image at right to see quarterly net earnings for the four oil supermajors.

Third-quarter results for ExxonMobil eclipsed its very strong second-quarter earnings. BP's third-quarter profit rose slightly from the second quarter, while Chevron's profit dipped. Shell's quarter-over-quarter earnings declined 63% from an extraordinarily strong second quarter. For more on Big Oil's second-quarter results, see August 3, 2022, article - Big Oil Q2 Profits Gush as Prices, Margins, Demand Rise.

Results for all four companies included non-recurring items, some of which were favorable while others had a negative effect on earnings. All four companies emphasized their low-carbon businesses, shareholder payouts and shrinking debt levels.

The gusher of profits come as President Joe Biden has threatened to ask Congress for new taxes and penalties on large oil producers unless they increase production. U.S. crude oil production has hovered around 12 million barrels per day (BBL/d) for months, though these four companies only produce a fraction of that. Production of 12 million BBL/d is about 1 million BBL/d under the pre-pandemic peak set in early 2020.

Click on the image at right to see a chart of U.S. crude oil production.

Many observers saw Biden's October 31 threat as a largely political gesture geared to preserving Democratic control of both houses of Congress, by playing to populist anger over continued high retail prices for transportation fuels. For more on Biden's threat, see November 1, 2022, article - Biden to Oil Companies: Increase Production or Face Possible Tax Hike.

The following are highlights from earnings releases.

ExxonMobil
In announcing quarterly results October 28, Chief Executive Officer (CEO) Darren Woods discussed his company's success: "The investments we've made, even through the pandemic, enabled us to increase production to address the needs of consumers. Rigorous cost control and growth of higher-margin petroleum and chemical products also contributed to earnings and cash flow growth in the quarter."

"At the same time, we are expanding our Low Carbon Solutions business with the signing of the largest-of-its-kind customer contract to capture and permanently store carbon dioxide, demonstrating our ability to offer competitive emission-reduction services to large industrial customers around the world."

The company's capital and exploration outlays totaled $5.7 billion in the third quarter, bringing year-to-date 2022 investments to $15.2 billion, on track with full-year guidance of $21 billion to $24 billion.

Global oil-equivalent production in the just-completed period was 3.7 million barrels per day. After removing asset divestment and the impact of exiting the Russian oil market, production rose more than 50,000 BBL/d from the second quarter, the company's October 28 earnings release said. On an oil-equivalent basis, a record of nearly 560,000 BBL/d was extracted from the Permian Basin during the quarter.

Industrial Info is tracking about 295 projects, worth an estimated $72 billion, in which ExxonMobil is involved. Most of that spending is scheduled to take place in the U.S., Mozambique, Vietnam, Guyana and China.

Chevron
In an October 28 earnings release, CEO Mike Wirth said, "We delivered another quarter of strong financial performance with return on capital employed of 25%. At the same time, we're increasing investments and growing energy supplies, with our Permian production reaching another quarterly record."

During the quarter, the company paid dividends of $2.7 billion (6% higher per share than third quarter 2021), increased investments by more than 50% from last year, paid down debt for the sixth consecutive quarter, and repurchased $3.75 billion of shares (more than 1% of shares outstanding). The company's third-quarter Permian Basin unconventional production totaled more than 700,000 barrels of oil equivalent per day, up more than 12% from last year's quarter.

"We've also taken important steps to position both our traditional and new energy businesses to help meet the world's growing demand for our products," Wirth said. During the just-completed quarter, the San Ramon-based supermajor approved a project to increase light crude oil processing capacity by 15% at its Pasadena, Texas refinery.

Around the world, Industrial Info is tracking approximately 223 active projects, collectively worth about $55.8 billion, that involve Chevron. Most of that spending is scheduled to take place in Kazakhstan and the U.S.

BP
When this London-based supermajor released earnings November 1, CEO Bernard Looney said: "This quarter's results reflect us continuing to perform while transforming. We remain focused on helping to solve the energy trilemma--secure, affordable and lower-carbon energy. We are providing the oil and gas the world needs today, while at the same time investing to accelerate the energy transition."

Chief Financial Officer Murray Auchincloss added that BP's third-quarter results show it is "continuing to execute its disciplined financial frame. Net debt fell for the 10th successive quarter; we are investing with discipline; and we are delivering on our commitment to shareholder distributions--announcing a further $2.5 billion share buyback."

In the November 1 earnings release, Looney pointed to BP's announcement October 17 that it had acquired U.S. renewable natural gas company Archaea Energy for $3.3 billion as "the most recent step in our strategic transformation of BP."

Industrial Info is tracking about 294 projects around the world worth approximately $38.5 billion that involve BP.

Shell
"We are delivering robust results at a time of ongoing volatility in global energy markets," Shell CEO Ben van Beurden said in releasing results October 27. "We continue to strengthen Shell's portfolio through disciplined investment and transform the company for a low-carbon future. At the same time, we are working closely with governments and customers to address their short and long-term energy needs."

The company announced a new $4 billion share-buyback program, which it expects to complete in early 2023. That would bring cash distributions to shareholders to more than 30% of cash flow from operations over the last four quarters. Shell also said it plans to increase its common-stock dividend about 15% in the fourth quarter, payable next March.

The company also announced that Wael Sawan would succeed Ben van Beurden as CEO January 1, 2023.

Industrial Info is tracking about 864 projects around the world worth an estimated $109.7 billion that involve Shell.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).