Exxon and Chevron profits fall to 4-year low amid lower oil prices

Exxon Mobil and Chevron, the largest oil producers in the US, reported their worst profits in four years. Pressure on revenue and profits came from increased supply from OPEC+ and an 11% quarter-on-quarter drop in oil prices. But record production volumes and cost control allowed both companies to perform better than analysts' expectations.

Profit at Exxon Mobil, the largest U.S. oil producer, dropped 23% year-over-year in the second quarter to the lowest level in four years amid falling oil prices due to increased production by OPEC+ countries, writes AP. 

Exxon Mobil's second-quarter profit was $7.1 billion, or $1.64 per share. A year earlier, it was $9.24 billion, or $2.14 per share. 

Still, the company beat Wall Street's profit forecasts amid higher oil and gas production and low production costs that offset the impact of lower oil prices, wrote Reuters. Analysts had expected earnings of $1.56 per share, according to LSEG data cited by the agency.

Exxon's revenue fell 14% to $81.5 billion from $93 billion a year earlier and fell short of Wall Street expectations of $82.8 billion, AP wrote.

Oil and gas production totaled 4.6 million barrels of oil equivalent per day, compared with 4.5 million barrels in the previous three months. That's the highest second-quarter total since the Exxon-Mobil merger more than 25 years ago, the company said.

"We continue to increase production," Exxon CEO Darren Woods said at a conference call (quote via FT). - Frankly, if you look at the current pricing environment, it's very attractive. So if you can't make money and get good returns at these prices, you may have deeper fundamental problems."

The company's main production regions include the Perm Basin, the largest oil field in the United States, and the promising Stabroek block off the coast of Guyana. As Exxon noted earlier, the low cost of production at these fields allows it to remain profitable even in periods of low oil prices, Reuters writes. According to Exxon, the launch of Yellowtail - the fourth floating platform for production, storage and shipment of oil off the coast of Guyana - is expected next week.

Profit from oil and gas production was $5.4 billion, down from $6.7 billion in the first quarter.

Exxon Mobil reported that second-quarter free cash flow rose 9.2% year-over-year to $5.39 billion, well above FactSet analysts' average forecast of $4.05 billion, according to FactSet data cited by MarketWatch, the gap between actual and forecast was the largest since the first quarter of 2021.

Exxon shares were down nearly 2% in trading on Aug. 1, and they have also lost about 2% since the beginning of the year.

Another American oil giant Chevron received a profit 44% lower than a year earlier. It amounted to $2.49 billion, or $1.45 per share. Excluding one-time charges, adjusted earnings were $1.8 per share, beating analysts' expectations ($1.73). It's also the lowest second-quarter profit in four years, AP writes. 

Chevron's quarterly revenue for the year fell 12.5% to $44.8 billion.

The company's global and U.S. production in terms of oil equivalent reached quarterly records of almost 4 mln bpd. Production at its joint venture Tengizchevroil increased by 34%, in the Gulf of Mexico by 22%, and production in the Permian Basin rose by 14% to 1 million barrels of oil equivalent per day;

Chevron's free cash flow more than doubled, rising 113% to $4.9 billion, beating the FactSet consensus forecast of $3.99 billion. This gap between actual and forecast was the largest since the third quarter of 2022, MarketWatch writes.

Despite strong second-quarter results, Chevron is warning that oil prices could fall in the second half of the year due to rising supply from OPEC+, which could lead to a global market glut, writes Bloomberg.  

"Given these factors, we are likely to see some pressure on prices in the second half of the year. We are prepared to operate in any price environment, so if there is a market weakening, we will be in a favorable position," said Chevron CFO Imer Bonner. 

Shares of Chevron were down 0.4% in trading on Aug. 1 at the time the news was written; they are up 5% since the beginning of the year.

The energy sector is facing price volatility amid increased production by OPEC+ countries. Over the quarter, the cost of the global benchmark - Brent crude oil - fell by 11%.

Additional pressure on prices came from global duties imposed by U.S. President Donald Trump, as they added to fears of a slowdown in the global economy and, consequently, lower demand for oil.

World oil prices during this period were almost $20 per barrel lower than a year earlier, which forced a number of U.S. producers to slow down production growth, especially in the Permian Basin. However, Exxon sees no reason to give up on expanding production at U.S. shale fields, Bloomberg writes.

This article was AI-translated and verified by a human editor