ExxonMobil and Chevron smashed profit records in the second quarter as rising energy prices following Russia’s invasion of Ukraine provided a windfall for the US oil supermajors.
The huge earnings come as consumers shed skyrocketing fuel costs that have helped drive inflation to levels not seen in decades across the US and Europe and threaten a political backlash against energy companies.
Exxon’s second-quarter net profit was $17.9 billion, beating analysts’ estimates of $16.9 billion, according to data compiled by S&P Capital IQ. The previous record quarterly profit for the company was $1[ads1]5.9 billion in 2012, another year of high oil prices.
Chevron’s second-quarter earnings were $11.6 billion, also its highest quarterly result and easily beating consensus estimates of $9.9 billion.
“The strong second-quarter results reflect a tight global market environment, where demand has recovered to near pre-pandemic levels” and supply has weakened, Exxon CEO Darren Woods said. “This situation was exacerbated by the events in Ukraine.”
The big profit came after UK-based Shell on Thursday reported its second consecutive record-breaking quarter with adjusted earnings of $11.5 billion. France’s TotalEnergies said on the same day that profit in the quarter rose to $9.8 billion, almost triple the same time a year ago.
The five Western oil supermajors – Exxon, Chevron, Shell, BP and TotalEnergies – are collectively on track to generate more than $50 billion in profits in the three months to the end of June.
Italian rival Eni also announced good quarterly results on Friday, boosting returns for investors after a year-on-year quadrupling in adjusted net profit to 3.81 billion euros.
Exxon and Chevron’s “downstream” oil refining businesses drove their soaring results after profit margins from selling refined fuel above the price of buying crude exploded to record highs.
Peter McNally, an analyst at research group Third Bridge, said the refining business was “excellent” for Exxon, noting that profits almost doubled from the first quarter despite the business being a “political lightning rod”.
In the United States, the national average price of gasoline shot to a record of more than $5 a gallon in June, although it has since declined.
The outlook for major oil companies has darkened in recent weeks as central banks around the world quickly raise interest rates to fight inflation, largely due to the effects of high energy prices, adding to fears of a global economic slowdown.
While demand slowed after gas prices rose, Woods said the company doesn’t “see anything that would say we’re in a recession, or near recession,” but he added it’s a “complex picture.”
The cash bonanza for Big Oil has sparked attacks from politicians and brought growing calls for a windfall tax on profits, which companies face in Britain and elsewhere. US President Joe Biden said last month that Exxon made “more money than God” and vowed to “make sure everyone knows about Exxon’s profits”.
Exxon and Chevron have responded by arguing that they are increasing spending on new supply to help meet rising demand. However, their investments are still far lower than before the coronavirus pandemic, and they have prioritized increasing dividends and share buybacks.
Woods touted the company’s production growth in the Permian Basin shale oil and gas fields in Texas and New Mexico, which he said is up 130,000 barrels of oil equivalent per day compared to the first half of 2021. Woods also said Exxon will increase capacity at a Beaumont, Texas, refinery with around 250,000 b/d early next year.
Chevron Chief Financial Officer Pierre Breber said in an interview that he expects the company to increase spending next year as the company responds to higher demand.
“Our budget this year is around $15 billion and our guidance through 2026 is $15 billion to $17 billion per year, so that gives us $2 billion to grow . . . you should see higher capital from us in 2023,” he said and pointed to the Permian as an area likely to see increased production.
Exxon’s quarterly revenue rose 71 percent year over year to $115.7 billion, while Chevron’s rose more than 80 percent to $68.8 billion. Shares in Exxon rose 4.3 percent to $96.64 on Friday, while Chevron jumped 8.5 percent to $163.22.