Exxon and Chevron surge back to profit

ExxonMobil and Chevron surged back to profit in the first quarter as the crude price rally helped repair Big Oil’s finances after the huge pandemic-induced losses of 2020.

Exxon reported net earnings of $2.7bn, up from a loss of $610m a year earlier and a loss of more than $20bn in the final three months of 2020. It was the first quarter of profit since 2019.

Chevron posted a profit of $1.4bn, down from $3.6bn a year earlier, snapping a three-quarter losing streak.

The return to profit marked a sharp turnround from a year when US oil operators were forced to slash spending, pile on debt and rein in output growth ambitions as collapsing crude markets inflicted billions of dollars in losses.

“The strong first-quarter results reflect the benefits of higher commodity prices and our focus on structural cost reductions”, said Darren Woods, Exxon chief executive.

Woods said cash flow from operating activities during the quarter “fully covered the dividend and capital investments” and helped reduce debt.

Both companies reported strong performance in their exploration and production businesses, which were buoyed by higher crude and natural gas prices.

But February’s deep freeze in Texas, which forced facilities along the Gulf coast to shut down, and weak fuel price margins hit the companies’ refining businesses.

Exxon said the winter storm cost it $600m in lost production and fuel sales as well as repair costs.

Chevron surprised shareholders this week with a 4 per cent bump in its quarterly dividend to $1.34 a share from June, a sign of optimism that the recovery was on a steady footing. It marks the 34th consecutive year it has increased its dividend, Chevron said. Exxon held its dividend.

Moody’s said this week that its outlook on the oil sector had turned positive for the next year on “sustained momentum in commodity prices” given restricted supply growth and signs of a robust post-pandemic recovery in consumption.

Brent crude, the international benchmark price, has mostly hovered in the mid-$60 a barrel range since mid-February, well above the break-even price needed by the oil majors.

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

Exxon’s shares were up about 1 per cent in early trading while Chevron’s were down roughly 3 per cent as its profit came in lower than Wall Street expectations and its debt rose.

The US supermajors have largely stuck to a strategy focused on their core oil and gas businesses, unlike their European rivals which have started investing in renewables, batteries and other clean-energy technologies.

But both have found themselves under increasing pressure from some shareholders to bolster their low-carbon businesses, and both face climate-focused votes at annual shareholder meetings next month.

Following investor pressure, Exxon during the quarter added new members to its board, announced a new low-carbon business segment, pitched a $100bn carbon capture megaproject and for the first time began reporting emissions from the products it sells.

But a push from activist hedge fund Engine No 1 to overhaul Exxon’s board and shift its spending priorities has garnered support in recent days from the country’s three largest pension funds, Calpers, New York State Common and Calstrs, as the proxy fight enters its endgame.