Exxon, Chevron after blowout earnings, the oil majors are betting on buybacks

  • High prices, margins lift majors to best quarters in history
  • Exxon’s revenues exceed the previous record set in 201[ads1]2

July 29 (Reuters) – The two biggest U.S. oil companies, Exxon Mobil Corp ( XOM.N ) and Chevron Corp ( CVX.N ), posted record earnings on Friday, boosted by high crude and natural gas prices and following similar results for European majors a day earlier.

The U.S. pair, along with UK-based Shell ( SHEL.L ) and France’s TotalEnergies ( TTEF.PA ), combined to earn nearly $51 billion in the latest quarter, almost double what the group brought in a year ago.

Exxon outperformed its rivals with a quarterly profit of $17.9 billion, the most for any international oil major in history.

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Chevron, Shell and Total raced to catch up with Exxon’s aggressive buyback program, which was kept unchanged.

The four returned a total of $23 billion to shareholders in the quarter, taking advantage of high margins from the sale of oil and gas. The fifth major, BP Plc ( BP.L ), reports next week. read more

The companies posted strong results in their production units, helped by the rise in benchmark Brent crude futures, which averaged around $114 a barrel in the quarter.

High crude oil prices can cut into margins for integrated oil companies, as they also bear the cost of crude oil used for refined products. However, after Russia’s invasion of Ukraine and numerous refinery shutdowns around the world in the wake of the coronavirus pandemic, refining margins exploded in the second quarter, outpacing gains in crude oil and boosting earnings.

“The strong second quarter results reflect a tight global market environment, where demand has recovered to near pre-pandemic levels and supply has decreased,” Exxon CEO Darren Woods said in a call with analysts. “Increasing supply will not happen overnight.”

The results from the majors are sure to draw fire from politicians and consumer advocates who say oil companies are taking advantage of a global supply shortage to fatten profits and cut consumers. US President Joe Biden said last month that Exxon and others were making “more money than God” at a time when consumer fuel prices soared to record highs. read more

Earlier this month, the UK passed a 25% windfall tax on oil and gas producers in the North Sea. US lawmakers have discussed a similar idea, although it faces long odds in Congress. read more

An unexpected tax does not provide “an incentive for increased production, which is really what the world needs today,” Exxon CFO Kathryn Mikells said in an interview with Reuters.

The companies say they are only meeting consumer demand and that prices are a function of global supply problems and a lack of investment. The majors have been disciplined with their capital and are resisting increasing capital spending due to pressure from investors who want better returns and resilience during a down cycle.

“In the short term (cash from oil) goes to the balance sheet. There’s nowhere else to go,” Chevron CFO Pierre Breber told Reuters.

Global oil production has been held back by a slow return of barrels to the market from the Organization of the Petroleum Exporting Countries and allies, including Russia, as well as labor and equipment shortages that prevent a faster increase in supply in places like the United States.

Exxon more than doubled earlier this year its projected buyback program to $30 billion through 2022 and 2023. Shell said it would buy back $6 billion in shares in the current quarter, while Chevron increased its annual buyback plans to a range of $10 billion to $15 billion . , up from $5 billion to $10 billion.

Exxon shares rose 4.6% to $96.93. Chevron shares rose nearly 9% to close at $163.78.

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Reporting by Sabrina Valle; writing by David Gaffen; Editing by Kirsten Donovan, Marguerita Choy and Daniel Wallis

Our standards: Thomson Reuters Trust Principles.

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