ExxonMobil and Chevron, two of the world’s largest oil supermajors, reported contrasting third-quarter financial results on Friday. While Exxon topped expectations, Chevron missed by a wide margin due to weak refining margins and chemical earnings.

Exxon posted adjusted earnings per share of $2.27, missing analyst estimates of $2.36 but not necessarily underperforming as the company does not incorporate certain asset sales into its reported bottom-line result. Meanwhile, Chevron delivered adjusted EPS of $3.05, falling short of the $3.68 consensus forecast.

The diverging performances underscored the challenges facing integrated energy giants as refined product and petrochemical markets are experiencing some headwinds.

For Exxon, strong oil and gas production helped offset downstream and chemical weaknesses. Upstream earnings declined by over 38% year-over-year to $5.76 billion as production volumes went down from 3.72 million barrels in Q3 2022 to 3.69 million barrels of oil equivalent per day during this quarter. This cushioned the blow from a 69% plunge in chemical earnings and a 58% drop in energy products profits.

Exxon Earnings Drop Cushioned by Smaller Production Declines

Exxon produced 3.7 million oil-equivalent barrels per day (boepd), in line with its guidance for the year. Meanwhile, global liquids production stood relatively unchanged compared to a year ago at 2.4 million kpd while natural gas volumes declined slightly to 7.7 million mcfd.

The company benefited from projects it started up over the last several years and focused on making several strategic investments during the pandemic-led downturn. This enabled Exxon to capitalize on resurgent oil demand resulting from the Russia-Ukraine armed conflict.

CEO Darren Woods stated that Exxon delivered another strong quarter of operational performance, earnings, and cash flow. While downstream operations struggled, Exxon partially offset this through higher crude exports. Earnings outside the U.S. also got a boost from favorable tax items.

Exxon’s cash flow from operations totaled $16 billion. The company hiked its quarterly dividend to 95 cents per share – a 4% increase. Exxon is on track to repurchase $17.5 billion in shares by the end of 2023.

Chevron Hit by Global Refining Underperformance

Chevron produced 3.15 million boepd, up slightly year-over-year thanks to its acquisition of Permian driller PDC Energy. However, the company faced challenges to ramp up its output in the Permian. It also cited normal field declines internationally.

But the real drag came from refining, where Chevron missed badly on profits. Earnings from global downstream operations slumped nearly 34% annually to $1.7 billion. Meanwhile, upstream results took a big hit as earnings dropped from $9.3 billion in Q3 2022 to $5.76 billion this past quarter.

CEO Mike Wirth stated that the downstream segment underperformed its potential. He flagged weakness in margins outside the U.S. along with turnaround activity and maintenance downtime impacting multiple refineries.

Like Exxon, Chevron is also positioning to grow output after acquiring Permian pure-play PDC Energy and expanding its presence in the Gulf of Mexico. But near-term headwinds in refining and chemicals marred its quarterly results.

The Two Companies Remain Focused on Long-Term Growth

Despite the weak quarterly prints, Chevron and Exxon are still performing extraordinarily well, especially when compared to other sectors. Their stocks are both still near their all-time highs. Furthermore, they are mostly taking the long view thanks to their recent acquisitions.

Exxon is acquiring shale producer Pioneer Natural Resources in a landmark $60 billion deal. Chevron agreed to buy shale driller Hess for $53 billion.

These deals significantly expand the oil giants’ presence in prolific U.S. shale basins. Exxon gained massive scale in the Permian Basin as a result of the deal. Meanwhile, Chevron bolsters its position in the Permian while securing growth opportunities in offshore Guyana.

Exxon CEO Darren Woods stated that the Pioneer transaction gives his company an unmatched scale to flex its Permian production. The deal also generates substantial synergies. Similarly, Chevron expects its Hess buyout to boost output starting in 2024. The deal reduces Chevron’s dependence on a single region for growth.

Wall Street analysts remain focused on the strategic benefits rather than short-term hiccups. The deals position the oil giants for sustained production increases to meet global demand.

Both companies are also focused on returning cash to shareholders. Exxon raised its dividend for the 40th consecutive year. Meanwhile, Chevron repurchased $3.4 billion in shares this quarter and distributed $2.9 billion in dividends for a total of $6.2 billion returned to investors.

The oil majors aim to leverage their heft and operational scale to deliver steady cash flows even as the energy landscape evolves. Their recent acquisitions, though carrying high price tags, bolster their long-term growth trajectories.

For now, Exxon is outperforming as Chevron works through downstream and operational challenges. But both companies have their sights set on consolidating leadership in tomorrow’s energy markets rather than just immediate results.

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