Boosted by oil prices, ExxonMobil and Chevron are throwing money at investors

ExxonMobil and Chevron on Friday reported rising profits despite falling oil and natural gas volumes, as the oil giants returned billions of dollars to shareholders following high crude prices and refining margins.

Both US oil giants posted huge increases in profits propelled by crude prices which rose after the Russian invasion of Ukraine. But the two companies have so far avoided further increases in capital spending to fund drilling and development despite the tightening global energy outlook.

“We continue to invest cautiously,” said Kathy Mikells, chief financial officer of ExxonMobil, which increased share buyback spending by $20 billion.

“We’re going to stay disciplined on capital. We gave you a range, we’ve stayed within that range since we started publishing it,” Chevron chief executive Mike Wirth said, discussing his plans for takeovers. of equities at $10 billion per year after previously targeting $5-10 billion per year.

The two oil giants are implementing planned capital spending increases for 2022, but have ruled out any additional investment.

Part of the reluctance to spend more on drilling comes as oil giants increase investment in hydrogen, carbon capture and storage and other low-carbon projects under pressure from environmental, social and social investors. and governance (ESG).

Russia has struck

After a terrible 2020 amid the Covid-19 shutdowns that devastated oil demand, oil companies returned to profitability in 2021 and continued to see profits soar this year.

ExxonMobil’s first-quarter profit more than doubled to $5.5 billion as a strong market for energy products more than offset $3.4 billion in one-time costs associated with its exit from the broad field Sakhalin offshore tanker after Russia invaded Ukraine.

Revenue rose 52.4% to $87.7 billion.

At Chevron, profits were $6.3 billion, more than four times the level a year earlier, with revenue rising 70% to $54.4 billion.

Friday’s eye-popping earnings could add to cries of oil industry “profits” from congressional Democrats, who are planning legislation in the wake of painful gas price hikes. Oil industry officials called the effort “political posturing.”

Oil prices have generally held above $100 a barrel after hitting around $130 a barrel in early March shortly after the Russian invasion of Ukraine.

Natural gas prices have also been high amid concerns over the reliability of Russian supplies to Europe, while refining profit margins are “above the 10-year range, with a tight supply/demand balance that should persist,” as ExxonMobil put it.

Wirth said there were few signs of immediate relief in the tight oil market, given growing demand as more economies ease Covid-19 restrictions, moves by some oil majors to reduce oil investments in favor of low-carbon energy and other factors.

“Inventory is pretty low, demand is still strong, and economies seem to be managing it at this point,” Wirth said on a conference call with analysts. “At some point, particularly if prices were to go up, I think that starts to put the brakes on the economy more.”

But the oil market remains cyclical and “supply response is coming,” he said.

Don’t run after growth

Although the two companies announced plans to increase production later this decade, production fell in the first quarter of 2022.

ExxonMobil’s oil and gas production was down 3% from the 2021 period, with the company reporting severe cold weather that weighed on production in Canada, as well as scheduled maintenance activities in Qatar and Guyana .

While Chevron touted a 10% increase in U.S. oil and gas production following an aggressive ramp-up in the Permian Basin in Texas, overall oil and natural gas volumes fell by 2% from last year’s level.

Factors in Chevron’s lower production included lower production in Thailand and the effect of lost production from a project in Indonesia where the contract expired.

Chevron Chief Financial Officer Pierre Breber said the company’s track record in the Permian Basin shows its ability to effectively ramp up production, as he confirmed the company will not increase its capital budget beyond the current range of $15-17 billion in 2022.

“We can maintain and expand our traditional energy business at very reasonable rates,” Breber said. “We don’t need to grow faster. We don’t get paid for it. There’s never been a time in our history when the market has valued growth.”

Shares of ExxonMobil fell 2.2% to $85.25, while Chevron fell 3.2% to $156.67.

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