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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Investors did not care for the third-quarter earnings reported by four international integrated supermajor oil firms, Exxon Mobil Corporation (NYSE:XOM) (Spring, Texas), Chevron Corporation (NYSE:CVX) (San Ramon, California), BP (NYSE:BP) (London, England) and Shell plc (NYSE:SHEL) (London, England).
Even though two of these large integrated oil and gas companies warned investors to expect weaker third-quarter earnings, investors still bid down the shares of all four supermajors the day each reported earnings. Through early November, prior to the stock market runup following the election of Donald Trump as 47th president, Chevron managed to return to positive territory. Shares of BP, by contrast, remained down about 10% from what they were prior to its third-quarter earnings release.
Rather than a comment on the performance and prospects of any individual company, analysts said investors were responding to a soft global market for oil and gas, where supply exceeded demand, with more than the usual number of uncertainties about future demand, supply and prices.
Crude oil prices slumped in the just-completed quarter: West Texas Intermediate (WTI) spot prices averaged about $76.84 per barrel, down from $82.30 and $93.13 for the two preceding third quarters, according to the U.S. Energy Information Administration (EIA). The agency also reported that Brent spot prices declined, to $79.84 per barrel, off from $86.66 and $101.71 for the third quarters of 2023 and 2022, respectively. Natural gas prices at the Henry Hub also declined compared to the year-earlier quarter.
Click on the images at right to see Brent and WTI average spot prices since 2019.
Results for all four companies are summarized below.
ExxonMobil
Weaker refining margins in the third quarter were partly offset by increased production from the Permian Basin and Guyana, the company said November 1 when it announced earnings. For the just completed July-September period, the supermajor earned about $8.6 billion on revenue of $90 billion. In the comparable year-earlier quarter, Exxon had profits of approximately $9.1 billion on sales of $91 billion.
Click on the image at right to see four years of third-quarter profits for the four integrated supermajors.
In its SEC Form 10-K, Exxon said $620 million of its earnings decline was attributable to lower prices for its products. A decrease in liquids price realizations was partly offset by an increase in natural gas price realizations, it said.
Most of Exxon's quarterly profits come from its exploration and production (E&P) of oil and natural gas, which generated about $6.2 billion of quarterly earnings. Refining, marketing and chemicals, the downstream businesses, produced about $3 billion in profits. More than half of the company's profits in both segments came from overseas operations.
Click on the images at right to see the third-quarter upstream and downstream profits for the four integrated supermajors.
The company is several years into a "structural" cost-reduction effort, which it defined as "decreases in cash operating expenses excluding energy and production taxes as a result of operational efficiencies, workforce reductions, divestment-related reductions and other cost-savings measures that are expected to be sustainable compared to 2019 levels." The company is seeking to trim costs by $15 billion from yearend 2019 costs by 2027. To date, about $11.3 billion of "structural" cost cuts have been achieved, including about $600 million in the just-completed quarter, Exxon said November 1.
When it announced earnings, Exxon also increased its common stock dividend 4%, payable to shareholders in the fourth quarter.
While most of its revenue and profits came from core extraction and processing of oil and gas, the company's earnings announcement also highlighted its hydrogen and carbon capture businesses. It noted, "Contingent on the U.S. federal government implementing regulations that are consistent with the Inflation Reduction Act's legislative intent, the Baytown, Texas, facility is expected to be the world's largest of its kind upon startup, capable of producing up to 1 billion cubic feet of hydrogen per day and more than 1 million tons of low-carbon ammonia per year." A final investment decision is expected in 2025 with anticipated startup in 2029. Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project and Plant databases can click here for the project report and here for the plant profile.
Meanwhile, in its carbon capture, sequestration and utilization business, the company has contracted to store up to 6.7 million metric tons of carbon dioxide (CO2), more than any other company. During the third quarter, Exxon secured the largest offshore CO2 storage site in the U.S. through an agreement with the Texas General Land Office. For more on that, see October 11, 2024, article - U.S. CCS Development Gains Steam.
Federal funding for Exxon's low-carbon businesses may be at risk, however, as President-elect Donald Trump has vowed to claw back unspent funds from President Joe Biden's energy and environmental measures, notably the Inflation Reduction Act (IRA) of 2022.
Commenting on third-quarter results, Darren Woods, chairman and chief executive officer, said, "We delivered one of our strongest third quarters in a decade. Our industry-leading results continue to demonstrate how our enterprise-wide transformation is improving the structural earnings power of the company. We've now increased our annual dividend for 42 years in a row, a claim that less than 4% of the S&P 500 companies can make. Furthermore, we lead industry in total shareholder returns for the past three, five and 10 years."
Chevron
Chevron earned $4.5 billion on approximately $51 billion of sales for the July-September period, down from earnings of $6.5 billion on $54 billion of revenue for the comparable year-earlier quarter.
Approximately $44 million of the earnings decline were caused by foreign currency effects, the company said. Earnings also were depressed by lower margins on refining product sales, lower realized prices for oil and gas and the absence of prior year favorable tax items.
In its November 1 earnings report, Mike Wirth, Chevron's chairman and chief executive, said, "We delivered strong financial and operational results, started up key projects in the U.S. Gulf of Mexico and returned record cash to shareholders this quarter."
Worldwide net oil-equivalent production increased 7% from last year, to about 3.4 million barrels of oil equivalent per day (MMboe/d), as U.S. production, particularly in the Permian Basin, set another quarterly record, it said. Last summer, Chevron closed its acquisition of independent driller PDC Energy, which has significant acreage and production in the Permian Basin. The company is in the process of trying to close its acquisition of Hess Corporation. For related information, see May 29, 2024, article - Hess Shareholders Approve $53 Billion Sale to Chevron, but Hurdles Remain.
The company added that it started up a number of key production projects this quarter. "These projects, combined with additional project startups through 2025, are expected to grow U.S. Gulf of Mexico production to 300,000 barrels of net oil-equivalent per day by 2026."
Wirth added, "We are also taking steps to optimize our portfolio and reduce operating costs to deliver superior long-term value to shareholders." The company said it expects to finalize asset sales in Canada, Congo and Alaska in fourth quarter 2024, as part of its plan to divest $10 billion to $15 billion of assets by 2028. Additionally, cost reduction efforts are underway, and the company is targeting $2 billion to $3 billion of structural cost reductions from 2024 by the end of 2026. For related information, see October 8, 2024, article - Chevron Offloads Alberta Assets to Canadian Natural Resources.
Chevron reported that its capital expenditures were down in the quarter, $4.7 billion compared to $5.5 billion in the year-earlier period, but free cash flow was up, to $5.6 billion from $5 billion in the July-September 2023 period.
BP
BP's underlying replacement cost profit, roughly the same as net earnings, was $2.3 billion in the just-completed quarter, down from $3.3 billion in the comparable year-earlier period. BP said its results reflected weaker refining margins, weak oil trading results and lower liquids price realizations, partly offset by higher natural gas price realizations. The gas marketing and trading result was average, it added in its October 29 earnings release.
BP's upstream underlying replacement cost profit, before interest and taxes, was about $4.6 billion for the just-completed period. Its downstream business generated about $400 million in earnings, again before taxes and interest.
BP said it completed a second-quarter share buyback of $1.75 billion and further repurchases of $1.75 billion per quarter would take place over the next two quarters.
Production for the quarter was about 2.4 MMboe/d, the company said.
In announcing the earnings, Murray Auchincloss, BP's chief executive officer, said, "We have made significant progress since we laid out our six priorities earlier this year to make BP simpler, more focused and higher value. In oil and gas, we see the potential to grow through the decade with a focus on value over volume. We also have a deep belief in the opportunity afforded by the energy transition process. We have established a number of leading positions and will continue high-grading our investments to ensure they compete with the rest of our business. I am absolutely clear that the actions we are taking will grow the value of BP."
Shell
The London-based supermajor earned about $4.3 billion on $71 billion in revenue for the just-completed period. By contrast, for the year-earlier quarter the company earned slightly over $7 billion on sales of $76.3 billion. Price realizations for liquids and natural gas were roughly flat compared to year-earlier results. Shipments of liquefied natural gas (LNG) were up compared to the July-September 2023 period.
Most of Shell's profit came from its upstream business, which netted earnings of about $4.9 billion. But the company lost about $481 million on its renewables and energy solutions unit.
When announcing earnings on October 31, Chief Executive Officer Wael Sawan said, "Shell delivered another set of strong results. We continue to deliver more value with less emissions, whilst enhancing the resilience of our balance sheet."
The company also said it would launch another $3.5 billion in stock buybacks during the fourth quarter, which would be the 12th consecutive quarter in which it repurchased $3 billion or more of its stock.
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) platform 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).
Even though two of these large integrated oil and gas companies warned investors to expect weaker third-quarter earnings, investors still bid down the shares of all four supermajors the day each reported earnings. Through early November, prior to the stock market runup following the election of Donald Trump as 47th president, Chevron managed to return to positive territory. Shares of BP, by contrast, remained down about 10% from what they were prior to its third-quarter earnings release.
Rather than a comment on the performance and prospects of any individual company, analysts said investors were responding to a soft global market for oil and gas, where supply exceeded demand, with more than the usual number of uncertainties about future demand, supply and prices.
Crude oil prices slumped in the just-completed quarter: West Texas Intermediate (WTI) spot prices averaged about $76.84 per barrel, down from $82.30 and $93.13 for the two preceding third quarters, according to the U.S. Energy Information Administration (EIA). The agency also reported that Brent spot prices declined, to $79.84 per barrel, off from $86.66 and $101.71 for the third quarters of 2023 and 2022, respectively. Natural gas prices at the Henry Hub also declined compared to the year-earlier quarter.
Results for all four companies are summarized below.
ExxonMobil
Weaker refining margins in the third quarter were partly offset by increased production from the Permian Basin and Guyana, the company said November 1 when it announced earnings. For the just completed July-September period, the supermajor earned about $8.6 billion on revenue of $90 billion. In the comparable year-earlier quarter, Exxon had profits of approximately $9.1 billion on sales of $91 billion.
In its SEC Form 10-K, Exxon said $620 million of its earnings decline was attributable to lower prices for its products. A decrease in liquids price realizations was partly offset by an increase in natural gas price realizations, it said.
Most of Exxon's quarterly profits come from its exploration and production (E&P) of oil and natural gas, which generated about $6.2 billion of quarterly earnings. Refining, marketing and chemicals, the downstream businesses, produced about $3 billion in profits. More than half of the company's profits in both segments came from overseas operations.
The company is several years into a "structural" cost-reduction effort, which it defined as "decreases in cash operating expenses excluding energy and production taxes as a result of operational efficiencies, workforce reductions, divestment-related reductions and other cost-savings measures that are expected to be sustainable compared to 2019 levels." The company is seeking to trim costs by $15 billion from yearend 2019 costs by 2027. To date, about $11.3 billion of "structural" cost cuts have been achieved, including about $600 million in the just-completed quarter, Exxon said November 1.
When it announced earnings, Exxon also increased its common stock dividend 4%, payable to shareholders in the fourth quarter.
While most of its revenue and profits came from core extraction and processing of oil and gas, the company's earnings announcement also highlighted its hydrogen and carbon capture businesses. It noted, "Contingent on the U.S. federal government implementing regulations that are consistent with the Inflation Reduction Act's legislative intent, the Baytown, Texas, facility is expected to be the world's largest of its kind upon startup, capable of producing up to 1 billion cubic feet of hydrogen per day and more than 1 million tons of low-carbon ammonia per year." A final investment decision is expected in 2025 with anticipated startup in 2029. Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project and Plant databases can click here for the project report and here for the plant profile.
Meanwhile, in its carbon capture, sequestration and utilization business, the company has contracted to store up to 6.7 million metric tons of carbon dioxide (CO2), more than any other company. During the third quarter, Exxon secured the largest offshore CO2 storage site in the U.S. through an agreement with the Texas General Land Office. For more on that, see October 11, 2024, article - U.S. CCS Development Gains Steam.
Federal funding for Exxon's low-carbon businesses may be at risk, however, as President-elect Donald Trump has vowed to claw back unspent funds from President Joe Biden's energy and environmental measures, notably the Inflation Reduction Act (IRA) of 2022.
Commenting on third-quarter results, Darren Woods, chairman and chief executive officer, said, "We delivered one of our strongest third quarters in a decade. Our industry-leading results continue to demonstrate how our enterprise-wide transformation is improving the structural earnings power of the company. We've now increased our annual dividend for 42 years in a row, a claim that less than 4% of the S&P 500 companies can make. Furthermore, we lead industry in total shareholder returns for the past three, five and 10 years."
Chevron
Chevron earned $4.5 billion on approximately $51 billion of sales for the July-September period, down from earnings of $6.5 billion on $54 billion of revenue for the comparable year-earlier quarter.
Approximately $44 million of the earnings decline were caused by foreign currency effects, the company said. Earnings also were depressed by lower margins on refining product sales, lower realized prices for oil and gas and the absence of prior year favorable tax items.
In its November 1 earnings report, Mike Wirth, Chevron's chairman and chief executive, said, "We delivered strong financial and operational results, started up key projects in the U.S. Gulf of Mexico and returned record cash to shareholders this quarter."
Worldwide net oil-equivalent production increased 7% from last year, to about 3.4 million barrels of oil equivalent per day (MMboe/d), as U.S. production, particularly in the Permian Basin, set another quarterly record, it said. Last summer, Chevron closed its acquisition of independent driller PDC Energy, which has significant acreage and production in the Permian Basin. The company is in the process of trying to close its acquisition of Hess Corporation. For related information, see May 29, 2024, article - Hess Shareholders Approve $53 Billion Sale to Chevron, but Hurdles Remain.
The company added that it started up a number of key production projects this quarter. "These projects, combined with additional project startups through 2025, are expected to grow U.S. Gulf of Mexico production to 300,000 barrels of net oil-equivalent per day by 2026."
Wirth added, "We are also taking steps to optimize our portfolio and reduce operating costs to deliver superior long-term value to shareholders." The company said it expects to finalize asset sales in Canada, Congo and Alaska in fourth quarter 2024, as part of its plan to divest $10 billion to $15 billion of assets by 2028. Additionally, cost reduction efforts are underway, and the company is targeting $2 billion to $3 billion of structural cost reductions from 2024 by the end of 2026. For related information, see October 8, 2024, article - Chevron Offloads Alberta Assets to Canadian Natural Resources.
Chevron reported that its capital expenditures were down in the quarter, $4.7 billion compared to $5.5 billion in the year-earlier period, but free cash flow was up, to $5.6 billion from $5 billion in the July-September 2023 period.
BP
BP's underlying replacement cost profit, roughly the same as net earnings, was $2.3 billion in the just-completed quarter, down from $3.3 billion in the comparable year-earlier period. BP said its results reflected weaker refining margins, weak oil trading results and lower liquids price realizations, partly offset by higher natural gas price realizations. The gas marketing and trading result was average, it added in its October 29 earnings release.
BP's upstream underlying replacement cost profit, before interest and taxes, was about $4.6 billion for the just-completed period. Its downstream business generated about $400 million in earnings, again before taxes and interest.
BP said it completed a second-quarter share buyback of $1.75 billion and further repurchases of $1.75 billion per quarter would take place over the next two quarters.
Production for the quarter was about 2.4 MMboe/d, the company said.
In announcing the earnings, Murray Auchincloss, BP's chief executive officer, said, "We have made significant progress since we laid out our six priorities earlier this year to make BP simpler, more focused and higher value. In oil and gas, we see the potential to grow through the decade with a focus on value over volume. We also have a deep belief in the opportunity afforded by the energy transition process. We have established a number of leading positions and will continue high-grading our investments to ensure they compete with the rest of our business. I am absolutely clear that the actions we are taking will grow the value of BP."
Shell
The London-based supermajor earned about $4.3 billion on $71 billion in revenue for the just-completed period. By contrast, for the year-earlier quarter the company earned slightly over $7 billion on sales of $76.3 billion. Price realizations for liquids and natural gas were roughly flat compared to year-earlier results. Shipments of liquefied natural gas (LNG) were up compared to the July-September 2023 period.
Most of Shell's profit came from its upstream business, which netted earnings of about $4.9 billion. But the company lost about $481 million on its renewables and energy solutions unit.
When announcing earnings on October 31, Chief Executive Officer Wael Sawan said, "Shell delivered another set of strong results. We continue to deliver more value with less emissions, whilst enhancing the resilience of our balance sheet."
The company also said it would launch another $3.5 billion in stock buybacks during the fourth quarter, which would be the 12th consecutive quarter in which it repurchased $3 billion or more of its stock.
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) platform 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).
