ExxonMobil and Chevron smashed profit records in the second quarter as the surging energy prices that followed Russia’s invasion of Ukraine delivered a windfall for the US oil supermajors.
The huge earnings come as consumers reel from sky-high fuel costs that have helped drive inflation to levels not seen in decades across the US and Europe, threatening a political backlash against energy companies.
Exxon’s second-quarter net profit was $17.9bn, beating analysts’ estimates of $16.9bn, according to data compiled by S&P Capital IQ. The previous record quarterly profit for the company was $15.9bn in 2012, another year of elevated oil prices.
Chevron’s second-quarter profit was $11.6bn, also its highest quarterly profit and easily surpassing consensus estimates of $9.9bn.
“The strong second-quarter results reflect a tight global market environment, where demand has recovered to near pre-pandemic levels” and supply has weakened, said Exxon chief executive Darren Woods. “This situation was made worse by the events in Ukraine.”
The blockbuster profits came after UK-based Shell on Thursday reported its second consecutive record-breaking quarter with adjusted earnings of $11.5bn. France’s TotalEnergies on the same day said profits in the quarter surged to $9.8bn, almost triple the same time a year ago.
The five western oil supermajors — Exxon, Chevron, Shell, BP and TotalEnergies — are together on track to generate well over $50bn in profits in the three months to the end of June.
Italian rival Eni on Friday also announced bumper quarterly results, boosting returns to investors after a fourfold year-on-year rise in adjusted net profit to €3.81bn.
Exxon and Chevron’s “downstream” oil refining businesses drove their soaring results after profit margins from selling refined fuels above the cost of buying crude oil exploded to record highs.
Peter McNally, analyst at research group Third Bridge, said the refining business was the “standout” for Exxon, noting its profits nearly doubled from the first quarter despite the business being a “political lightning rod”.
In the US, the national average petrol price shot to a record of more than $5 a gallon in June, although it has since declined.
The outlook for the oil majors has darkened in recent weeks as central banks across the world rapidly lift interest rates to combat inflation, in large part because of the effects of rocketing energy prices, raising fears of a global economic slowdown.
While demand softened after petrol prices surged, Woods said the company is not “seeing something that would say we are in a recession, or near-recession”, but he added that it is a “complex picture”.
The cash bonanza for Big Oil has triggered attacks from politicians and brought widening calls for a windfall tax on the profits, which companies face in the UK and elsewhere. US president Joe Biden last month said Exxon was making “more money than God” and promised to “make sure everyone knows Exxon’s profits”.
Exxon and Chevron have responded by arguing that they are increasing spending on new supply to help meet surging demand. However, their capital spending remains far lower than prior to the coronavirus pandemic and they have prioritised increasing dividends and stock repurchases.
Woods touted the company’s production growth in the Permian Basin shale oil and gasfields in Texas and New Mexico, which he said is up 130,000 barrels of oil equivalent a day compared to the first half of 2021. Woods also said Exxon will increase the capacity of a Beaumont, Texas, refinery by about 250,000 b/d early next year.
Chevron chief financial officer Pierre Breber said in an interview he expects the company to lift spending next year as the company responds to higher demand.
“Our budget this year is around $15bn and our guidance through 2026 is $15bn to $17bn per year, So that gives us $2bn of room to increase . . . you should see higher capital from us in 2023,” he said, pointing to the Permian as an area likely to have increased output.
Exxon’s quarterly revenue increased by 71 per cent year on year to $115.7bn, while Chevron’s rose more than 80 per cent to $68.8bn. Shares of Exxon gained 4.3 per cent to $96.64 on Friday, while Chevron jumped 8.5 per cent to hit $163.22.