2022 brings bumper profits for U.S. oil majors Chevron and ExxonMobil

U.S. oil and gas majors Chevron and ExxonMobil have revealed record 2022 profits of $35.5 billion and $55.7 billion, respectively. This was driven by elevated energy prices and growing demand for higher oil and gas production and tight supply.

The year now behind us brought greater lessening of restrictions imposed due to the COVID-19 pandemic, however, the Ukraine crisis pushed energy security to the forefront, as it led to the current global energy crisis and price volatility. As a result, many countries, especially in Europe, decided to pursue the green shift towards renewables with more vigour, in a bid to shield their consumers from high gas prices and inflation while also building a sustainable future in line with their net-zero targets.

Even though many potential solutions were proposed last year to get to grips with the energy crisis and tackle the energy trilemma, the one about countries needing all the energy solutions they can get – including oil, gas, solar, wind, nuclear, and hydrogen – dominated the stage throughout 2022. These factors brought global energy players all-time high profits in 2022.

Chevron reported last week that its earnings in the fourth quarter of 2022 were $6.4 billion, compared with $5.1 billion in the fourth quarter of 2021. The U.S. giant outlined that $1.1 billion of international upstream write-off and impairment charges and pension settlement costs of $17 million were included in this quarter while foreign currency effects decreased earnings by $405 million.

The U.S. player posted adjusted earnings of $7.9 billion for the fourth quarter of 2022, compared to adjusted earnings of $4.9 billion in the fourth quarter of 2021. Chevron’s sales and other operating revenues in 4Q of 2022 were $55 billion, compared to $46 billion in the year-ago period.

The company also reported full-year 2022 earnings of $35.5 billion, compared with $15.6 billion in 2021. Chevron’s adjusted earnings were $36.5 billion in 2022 compared to adjusted earnings of $15.6 billion in 2021.

Commenting on this, Mike Wirth, Chevron’s chairman and chief executive officer, remarked: “We delivered record earnings and cash flow in 2022, while increasing investments and growing U.S. production to a company record. Again in 2022, we delivered on our financial priorities: returning cash to shareholders, investing capital efficiently, and paying down debt.”

Chevron outlined that it increased its quarterly dividend per share by 6 per cent from the prior year, paying out $11.0 billion to shareholders; achieved a return on capital employed of more than 20 per cent, the highest since 2011; strengthened its balance sheet further with a debt ratio of 12.8 per cent and net debt ratio of 3.3 per cent; and returned an additional $11.25 billion to shareholders, repurchasing nearly 70 million shares, ending the year at an annual repurchase rate of $15 billion.

The U.S. firm’s worldwide net oil-equivalent production was 3.01 million barrels per day in the fourth quarter of 2022 and 3.00 million barrels per day for the full-year 2022. While both quarterly and annual production were down 3 per cent compared to their respective 2021 periods, international production decreased 7 per cent in 2022 primarily due to the end of concessions in Thailand and Indonesia, while U.S. production increased 4 per cent compared to 2021, mainly in the Permian Basin.

The oil major’s U.S. net oil-equivalent production of 1.19 million barrels per day in 4Q 2022 was down slightly from a year earlier as decreases in the Gulf of Mexico were partially offset by increases in the Permian Basin. The net liquids component of oil-equivalent production in the fourth quarter of 2022 decreased by 4 per cent to 895,000 barrels per day, and net natural gas production increased by 4 per cent to 1.79 billion cubic feet per day, compared to 4Q 2021.

On the other hand, the company’s international net oil-equivalent production of 1.82 million barrels per day in 4Q 2022 was down 82,000 barrels per day from 4Q 2021, primarily due to the absence of production following the expiration of the Erawan concession in Thailand. The net liquids component of oil-equivalent production decreased by 5 per cent to 852,000 barrels per day in the fourth quarter of 2022, while net natural gas production decreased by 4 per cent to 5.80 billion cubic feet per day compared to 4Q 2021.

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During 2022, Chevron also added 1.1 billion barrels of net oil-equivalent proved reserves – subject to final reviews – equating to approximately 97 per cent of net oil-equivalent production for the year. The largest net additions were from assets in the Permian Basin, Israel, Canada and the Gulf of Mexico. The largest net reductions were from assets in Kazakhstan, primarily due to higher prices and their negative effect on reserves.

Chevron’s cash flow from operations in 2022 was $49.6 billion, compared with $29.2 billion in 2021. Excluding working capital effects, cash flow from operations in 2022 was $47.5 billion, compared with $30.5 billion in 2021. In addition, the capital and exploratory expenditures for the company’s consolidated entities (C&E) in 2022 were $12.3 billion, compared with $8.6 billion in 2021. 

Meanwhile, ExxonMobil, announced on Tuesday, 31 January 2023, its fourth-quarter 2022 earnings of $12.8 billion, compared to $8.9 billion for the same period in 2021. The results for 4Q 2022 include unfavourable identified items of $1.3 billion associated with additional European taxes on the energy sector and asset impairments, partly offset by one-time adjustments related to the Sakhalin-1 expropriation.

The U.S. giant explained that its full-year 2022 earnings were $55.7 billion compared with $23.0 billion in 2021, an increase of $32.7 billion. These earnings were unfavourably impacted by $3.4 billion mainly from Sakhalin-1 impairments in the first quarter, thus, earnings excluding these identified items were $59.1 billion, an increase of $36.1 billion from the prior year.

Other factors that impacted ExxonMobil’s results were price and margin improvements driven by recovering demand and tight supply, the favourable mark-to-market impact of unsettled derivatives, and volume increases on strong refining throughput and growth of advantaged assets.

The company’s capital and exploration expenditures were $7.5 billion in the fourth quarter of 2022, bringing full-year 2022 investments to $22.7 billion, compared to $5.8 billion in the fourth quarter of 2021 and $16.6 billion for the full-year 2021.

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Darren Woods, ExxonMobil’s chairman and chief executive officer, pointed out: “The hard work and commitment of our people enabled us to deliver industry-leading operating and financial results and shareholder returns in 2022. While our results clearly benefited from a favourable market, the counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering and supplies became tight. We leaned in when others leaned out.”

ExxonMobil disclosed that oil-equivalent production in 4Q 2022 was 3.8 million barrels per day, as the growth more than offset divestment impacts, as production increased by more than 100,000 oil-equivalent barrels per day compared to the prior quarter. The company highlighted that Permian delivered record production in 4Q 2022 of more than 560,000 oil-equivalent barrels per day. ExxonMobil confirmed that the first LNG cargo was loaded from the Coral South LNG development in Mozambique. 

Excluding impacts from divestments and the Sakhalin-1 expropriation, the oil major underscored that its oil-equivalent production grew by about 170,000 barrels per day from continued investment in advantaged growth projects in the Permian and Guyana.

While the production in the Permian grew by about 90,000 oil-equivalent barrels per day, the production in Guyana increased by around 70,000 oil-equivalent barrels per day with Liza Phase 2 starting up ahead of schedule and both Liza Phase 1 and 2 producing above design capacity.

“Our plan for 2023 calls for further progress on our strategic objectives, which include leading the industry in safety, operating, and financial performance. We will continue to invest in our advantaged projects to deliver profitable growth, help meet society’s growing needs, and reduce emissions in our operations, while providing innovative solutions that help others reduce theirs,” added Woods.

Regarding ExxonMobil’s most recent activities, it is worth noting that the U.S. giant made a significant new oil discovery at the Stabroek block, which boosts the block’s hydrocarbon resources, fortifying the oil major’s existing portfolio of extensive development opportunities offshore Guyana.

Global Witness, an international NGO, has criticized the record profits that Chevron and ExxonMobil recorded. When it comes to the California-based oil giant, Chevron, this NGO underscores that the profit of $35.5 billion is enough to cover the entire cost of losses from the recent devastating floods in the company’s home state.  

In line with this, Global Witness outlines that Chevron’s earnings of $6.4 billion in the fourth quarter of 2022, which build on a banner year that resulted in a 127 per cent jump in profits compared to 2021, come as Californians struggle to rebuild after floods earlier this month consumed roads, businesses, and homes with current damage estimates sitting at over $30 billion. 

Furthermore, the NGO claims that the data from the Climate Accountability Institute shows Chevron ranked in second place of the 20 fossil fuel companies whose exploitation of the world’s oil, gas and coal reserves can be directly linked to more than one-third of all greenhouse gas emissions in the modern era. 

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Previously, Global Witness filed a complaint with U.S. regulators against Chevron for “misleading consumers by claiming to be climate friendly while investing heavily in fossil fuels. What’s more shocking is that it’s companies like Chevron that are the chief architects of climate breakdown.”

Thanks to the climate crisis, the NGO explained that people across the world would continue to experience ever-increasing extreme weather events, like California’s floods, “yet big polluters are using shameful greenwashing tactics to try to delay and distract us from real climate action, all while they continue to rake in huge profits.”

Global Witness further states that it is “time to hold them to account. We’re calling on governments to take a stand and put an end to this toxic industry’s political and economic power.”

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Regarding ExxonMobil’s profit of $55.7 billion, Global Witness claims that this would be enough to pay for all of the aid that the U.S. government has given to Ukraine to date, and still leave the company $7.7 billion. 

Since the U.S. oil major said it had made $12.8 billion in the fourth quarter of 2022, the NGO underlines that once this is added to the company’s highly profitable first three quarters, the firm’s 2022 profits jumped 142 per cent over 2021. 

At the same time, the NGO says that the U.S. has “rightfully” given some $48 billion in humanitarian, military, and other aid to Ukraine in 2022, so that, the country can “defend itself against Russia’s invasion – a fossil-fuelled war that has driven oil prices and Exxon’s profits higher.”

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Global Witness concludes that “while it’s correct for the U.S. to generously support Ukraine, it cannot be right for Exxon to make billions due to the ongoing energy problems that have been exacerbated by the war in Europe. Governments need to act and remove the political and economic sway of this harmful industry.“

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