Despite lower profits, European and US oil & gas giants soldier on with ‘solid’ results

Two European oil majors – TotalEnergies and Eni – and their U.S. counterparts – ExxonMobil and Chevron – have reported strong operating and financial performance in the third quarter of 2023 amid decreased oil and gas prices, which are nowhere near the highs observed in 2022. All of these energy players are continuing to pursue more hydrocarbons while optimizing their portfolios by branching out into low-carbon and green sources of supply in the transition journey to net zero.

There is no doubt that 2022 brought global energy players all-time high profits, as illustrated by the results provided by Eni, Equinor, TotalEnergies, BP, Shell, Chevron, and ExxonMobil during a time when energy security reigned supreme, climbing to the top of governments’ agendas while they set out to shield consumers from high gas prices and inflation.

Even though energy security is still very high on the global priority list, oil and gas prices have taken a downturn, tumbling down from the all-time high levels seen last year. This downward trend has been evident throughout the first nine months of 2023. However, the multi-billion shareholder payouts, which the U.S. and European oil majors have dished out since 2022 have come under fire from various non-governmental organizations (NGOs) and environmental groups.

While France’s TotalEnergies is feeling the bite of lower oil and gas prices, the company still recorded a net income of $6.7 billion in the third quarter of 2023, compared to a net income of $4.1 billion in the second quarter of 2023 and $6.6 billion in the third quarter of 2022. The French giant’s adjusted net income was $6.5 billion in 3Q 2023, compared to $5 billion in 2Q 2023 and $9.9 billion in 3Q 2022, mainly due to lower oil and gas prices.

Patrick Pouyanné, CEO of TotalEnergies, commented: “While implementing its balanced transition strategy that combines Oil & Gas and Integrated Power, TotalEnergies demonstrates once again this quarter its ability to leverage a supportive price environment, generating adjusted net income of $6.5 billion and return on average capital employed of over 20%. Cash flow from operations (CFFO) increased to $9.3 billion in the third quarter and totaled $27.4 billion in the first nine months of 2023.”

TotalEnergies posted an adjusted EBITDA of $13.06 billion for the third quarter of 2023, compared to $11.1 billion for the second quarter of 2023 and $19.4 billion for the third quarter of 2022. The company’s cash flow from operating activities was $9.5 billion in 3Q 2023, compared with $9.9 billion in 2Q 2023 and $17.5 billion in 3Q 2022.

Pouyanné further added: “In the Oil & Gas business, production at nearly 2.5 Mboe/d is up 5% year-on-year, thanks to the start-up of several oil projects in Brazil (Mero 1), Nigeria (Ikike) and Iraq (Ratawi) and gas projects in Oman (Block 10) and Azerbaijan (Absheron). During the quarter, confirmation of exploration successes in Suriname and Namibia opened the way to new oil developments contributing to future cash flow growth.

“Exploration & Production delivered a strong quarter, with adjusted net operating income and cash flow both increasing by $0.8 billion quarter-to-quarter to $3.1 billion and $5.2 billion, respectively. Integrated LNG confirms the robustness of its global integrated portfolio, with adjusted net operating income of $1.3 billion and cash flow of $1.6 billion. Downstream adjusted net operating income and cash flow increased sequentially to $1.8 billion and $2.2 billion, respectively, due to good availability of European refining assets.”

The hydrocarbon production was 2,476 thousand barrels of oil equivalent per day (kboe/d) in the third quarter of 2023, up 5% year-on-year, excluding Novatek, comprised of a 5% boost due to start-ups and ramp-ups, including Absheron in Azerbaijan, Johan Sverdrup Phase 2 in Norway, Mero 1 in Brazil, Ikike in Nigeria and Bloc 10 in Oman; a 2% addition due to a decrease of planned maintenance, notably on Ichthys in Australia and lower unplanned outages, notably at the Kashagan field in Kazakhstan; a 1% increase due to improved security conditions in Nigeria and Libya; and a decrease of 3% due to natural field declines.

Pouyanné highlighted: “This quarter again demonstrates the relevance of TotalEnergies’ profitable transition strategy. For the first time, Integrated Power adjusted net operating income and cash flow both exceed $500 million. Year-to-date cash flow at the end of the third quarter is close to $1.5 billion, in line with Integrated Power’s objective to generate around $2 billion of cash flow in 2023. TotalEnergies commissioned its 1 GW Seagreen offshore wind farm, which was delivered within budget, and its 380 MW Myrtle Solar project in the U.S., which includes battery storage, and acquired 100% of Total Eren.

“Based on the strength of both these results, the board of directors decided the distribution of the third interim dividend for the 2023 financial year in the amount of €0.74/share, up 7.25% year-on-year. Additionally, the company is executing a $9 billion share buyback program in 2023, as announced on September 27. Year-to-date shareholder distribution is close to 43% at the end of September, in line with the recently increased annual guidance of more than 40%.”

According to TotalEnergies, oil prices remain buoyant at around $90/b at the beginning of the fourth quarter, supported by OPEC+ actions on supply and a tense geopolitical context. The 2 Mb/d increase in petroleum products this year is driven by emerging countries, notably due to the recovery of the aviation sector and demand from the petrochemical industry in China.

Despite entering the winter period with high natural gas inventories in Europe, in a tense market, the company believes that gas prices remain very reactive to production disruptions. Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, the French giant anticipates that its average LNG selling price should be above $10/Mbtu in the fourth quarter of 2023.

Furthermore, TotalEnergies expects hydrocarbon production to range between 2.4 and 2.5 Mboe/d in 4Q 2023, which reflects the impact of the sale of its oil sands assets in Canada. The utilization rate in refineries should be above 80% during the fourth quarter of 2023, with the restart of Port Arthur expected in mid-November. The company anticipates cash proceeds of around $4.1 billion in 4Q 2023 from the Canadian assets divestments, which could bring back the gearing below 8%. The 2023 net investment guidance is still between $16 and $17 billion.

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Global Witness, an international NGO, has made a new analysis, which claims that TotalEnergies paid €25 billion (around $26.5 billion) to shareholders since Russia’s full-scale invasion of Ukraine. The analysis indicates that the French giant paid dividends of €13 billion ($13.7 billion) and repurchased shares worth €12 billion ($12.7 billion) since April 2022. In 2023 alone, the company paid shareholders €11 billion ($11.9 billion), which could cover over 90% of the €12 billion in financial aid the EU has paid Ukraine this year up to August, based on the NGO’s analysis.

Italy’s Eni is a European oil major, which has joined TotalEnergies in posting 3Q 2022 results affected by the downward trend in energy prices. In line with this, the Italian giant’s adjusted profit before tax was €3.3 billion in 3Q 2023, marked by a weaker scenario with the Brent price down by 14% and the benchmark gas price down by more than 80%. However, the oil major claims that this still marked another “strong set of results driven by continuing underlying improvements,” as during the first nine months of 2023 the adjusted profit before tax was €11.9 billion.

Based on the company’s results, proforma adjusted EBIT for 3Q 2023, including the operating margin of equity accounted entities, was €4 billion, amounting to €14.1 billion in the first nine months of 2023, driven by a recovery in E&P earnings versus 2Q 2023, thanks to higher production volumes and better realizations and a solid contribution from Refining, Enilive (Sustainable Mobility business) and Plenitude.

The Italian player’s E&P segment earned €2.6 billion of adjusted EBIT in 3Q 2023, down 39% from 3Q 2022 impacted by weaker realized prices, but almost 30% higher than the previous quarter. Including the contribution of JV/associates, proforma adjusted EBIT was €3.4 billion. The E&P adjusted EBIT for the first nine months of 2023 was €7.5 billion, compared to €13.5 billion in the first nine months of 2022. Eni’s production in the quarter was up 4% year-over-year at 1.64 mln boe/d.

Moreover, GGP adjusted EBIT was €0.11 billion in 3Q 2023, reflecting limited benefits from asset optimization in a market characterized by relatively lower volatility and narrower gas spreads compared with 3Q 2022. On the other hand, Enilive, Eni Sustainable Mobility, delivered €0.27 billion of adjusted EBIT, slightly below results seen in 3Q 2022 but up by 9% in the first nine months of 2023 at €0.61 billion.

Eni’s Plenitude & Power delivered solid results with €0.22 billion of adjusted EBIT, up 27% year-on-year; and up 15% in the first nine months of 2023. The company elaborated that the continued steady performance in the retail business and the material ramp-up in renewable capacity plus optimization of gas-fired power plants, were partly offset by lower market margins for both renewables and gas-fired plants.

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The adjusted net profit attributable to Eni shareholders was €1.82 billion in 3Q 2023, impacted by weaker hydrocarbon prices, but significantly offset by underlying business outperformance. In the first nine months of 2023, the adjusted net profit attributable to Eni shareholders was €6.66 billion. Eni’s adjusted operating cash flow before working capital at replacement cost was €3.4 billion in 3Q 2023, exceeding outflows related to organic capex of €1.9 billion, resulting in an organic FCF of €1.5 billion. In the first nine months of 2023, adjusted cash flow was €12.9 billion, exceeding outflows related to capex of €6.7 billion, resulting in an organic free cash flow of around €6.2 billion.

Eni confirms that the acquisition of Neptune has been cleared by the relevant EU antitrust authorities and is on track to be completed by the first quarter of 2024. During the first nine months of 2023, new exploration resources added to the portfolio reached about 580 million boe, driven mainly by the discoveries made offshore Egypt, Congo, Mexico, and Indonesia.

The oil major underlines that the start-up of the Baleine field off the Côte d’Ivoire in August 2023 demonstrated a rapid time-to-market, less than two years after the discovery and less than a year and a half after the final investment decision (FID). Eni says that Baleine stands out as the first emissions-free – Scope 1 and 2 – production project in Africa. The gas production will be delivered to the national grid, enabling the country to meet its domestic electricity requirements, facilitating energy access, and strengthening its role as a regional energy hub for neighboring countries.

At the start of October 2023, Eni announced a gas discovery at Geng North-1, an exploration well drilled in the North Ganal PSC, off Indonesia, with a preliminary estimated discovered volume of 5 trillion cubic feet (tcf) of gas and 400 mmbbl condensate in place. This discovery, together with the pending completion of the acquisition of Neptune, which owns shares in the assets in the area, and with the recent purchase of Chevron interests in the Rapak and Ganal PSC blocks, opens up “exciting potential” in the Indonesia gas sector, according to the Italian giant. Massive natural gas resources will be developed in synergy with the firm’s existing operating fields, new developments, and leveraging on the Bontang LNG export terminal, offering the prospect of transforming the Kutei basin into a new gas hub.

Claudio Descalzi, Eni CEO, stated: “On E&P we are accelerating our plan to boost equity gas and LNG production, a key driver to secure reliable supply and at the same time pursue our decarbonization goals. The outstanding Geng North-1 exploration discovery, currently the industry’s largest this year, together with the soon-to-be-completed Neptune acquisition and recent purchase of Chevron’s interests in Indonesia, will enable us to target exploitation of material resources offshore the Kutei basin. The start-up, in less than two years from discovery, of the giant Baleine oilfield off the Cote d’Ivoire reaffirms the validity of our value accretive fast-track development approach, ensuring traditional energy supplies whilst, as Africa’s first net-zero scope 1 and 2 project, decarbonizing our operations.

“GGP substantially enhanced the contracted LNG portfolio with three new long-term agreements in Congo, Qatar and Indonesia totaling 6.5 bcm/year at plateau. The businesses of the energy transition are growing quickly. Enilive (Eni Sustainable Mobility) has closed the Chalmette biorefinery JV deal in the USA and is targeting other international biofuels projects leveraging our distinctive technologies and expertise. Plenitude is on track to achieve the planned 3 GW of renewable installed capacity by year-end while also delivering its financial targets, while the completion of the Novamont acquisition will strengthen Versalis’ green chemicals transformation.”

Eni’s 2023 updated operational and financial guidance outlines that within the E&P segment, the 2023 guidance for hydrocarbon production is narrowed to between 1.64-1.66 mln boe/d versus the previous guidance of 1.63-1.67 mln boe/d. The company also confirmed its previously raised GGP guidance of adjusted EBIT for 2023 in the €2.7 – €3 billion range. In contrast, Plenitude’s proforma adjusted EBITDA guidance is raised to around €0.9 billion, higher than the initial planning assumptions for the year of €0.7 billion.

Additionally, Eni’s adjusted EBIT guidance is raised to around €14 billion, higher than the mid-year guidance of €12 billion, reflecting improved market conditions and incorporating an improved underlying performance of around €2.6 billion, which is €0.6 billion higher than the mid-year estimate. The firm is also revising its projections of cash flow from operations before working capital upward to reach around €16.5 billion versus previous guidance of €15.5-€16 billion.

Descalzi further noted: “And finally, our leading portfolio of CCS solutions was further enhanced by the award of the Hewett storage license in the UK and by important progress on both the technical and regulatory sides. In a volatile trading environment, proforma adjusted EBIT including our JV and associates reached €4 bln driven by sequential growth in E&P, Refining and our Retail business. Operating cash flow was €3.4 bln resulting in an organic FCF of about €1.5 bln after funding €1.9 bln of capex. Both cash and operating results stand out at the top of our historical quarterly performances.

“To date, the cumulative organic FCF of about €6.2 bln, has been well above the 2023 expected pay-out to shareholders including share repurchases, contributing to our financial flexibility and strengthening the balance sheet with leverage stable at 0.15. Looking forward, we believe that the evident underlying improvement of the business and our strategic progress will support highly attractive returns to our shareholders. In line with this, we are raising our full-year guidance of EBIT and cash flow, while accelerating our buyback plan for this year.”

Compared to its European peers, ExxonMobil’s earnings for 3Q 2023 were $9.1 billion, versus $7.9 billion in the second quarter of 2023 and $19.7 billion in the third quarter of 2022. The company pointed out that results improved with strong operating performance, including record third-quarter refining throughput as well as a higher crude price and industry refining margin environment. These factors were partly offset by weaker chemical margins, unfavorable derivative mark-to-market impacts, and trading timing effects that are expected to unwind over time.

Compared to the same quarter last year, earnings decreased $6.3 billion, while excluding identified items, earnings declined $5.7 billion, driven by a nearly 60% decrease in natural gas realizations and a 14% decrease in crude realizations. Excluding the impacts from divestments, entitlements, and government-mandated curtailments, ExxonMobil’s net production grew about 80,000 oil-equivalent barrels per day, driven by the Permian and Guyana.

The oil major’s year-to-date earnings were $17.2 billion, a decrease of $11.1 billion versus the first nine months of 2022. The prior-year period was impacted by net negative identified items totaling $2.4 billion, including an identified item associated with the Sakhalin-1 expropriation. Excluding identified items, earnings declined $13.3 billion. Higher production from advantaged projects in Guyana and the Permian provided a partial offset to lower crude and natural gas realizations. The U.S. giant’s year-to-date production was 3.7 million oil-equivalent barrels per day.

The company claims that it achieved $9 billion of cumulative structural cost savings versus 2019, ahead of schedule, with further savings expected by year-end. ExxonMobil’s earnings drove cash flow from operations of $16 billion and free cash flow of $11.7 billion, an increase of $6.6 billion and $6.7 billion respectively versus the second quarter. The firm’s third-quarter shareholder distributions of $8.1 billion included $3.7 billion of dividends and $4.4 billion of share repurchases while year-to-date share repurchases were $13.1 billion, consistent with the company’s plan to repurchase $17.5 billion of shares in 2023.

ExxonMobil also increased its annual dividend for 41 consecutive years, including the increase of $0.04 per share, or 4%. The debt-to-capital ratio remained at 17% and the net-debt-to-capital ratio was 4%, reflecting a period-end cash balance of $33 billion. The U.S. player continued to strengthen its portfolio with the closing of the Thailand refinery divestment in the third quarter. Total asset sales and divestments generated $0.9 billion of cash proceeds, bringing the year-to-date total to $3.1 billion.

The oil major’s cash flow from operations was $16 billion, up $6.6 billion versus the second quarter. In line with plans, capital and exploration expenditures were $6 billion in the third quarter, bringing year-to-date 2023 expenditures to $18.6 billion. The firm’s full-year capital and exploration expenditures are expected to be at the top end of the guidance of $23 billion to $25 billion as the company pursues value-accretive opportunities.

As part of the announced Pioneer merger, ExxonMobil plans to accelerate Pioneer’s net-zero Permian ambition to 2035 from 2050. In addition, using a combination of technology, operating capabilities, infrastructure, recycling, and water sharing, the company expects to increase the amount of water sourced from oil and gas production used in its Permian fracturing operations to more than 90% by 2030.

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Darren Woods, ExxonMobil’s Chairman and CEO, underlined: “We delivered another quarter of strong operational performance, earnings and cash flows, adding nearly 80,000 net oil-equivalent barrels per day to support global supply. The organization’s relentless focus on safety, environment and value is paying off – driving record refining throughputs, delivering big projects at first-quintile cost and schedule, and exceeding planned structural cost savings while reducing emissions intensity and the impact on the environment.

“The two transactions we’ve announced further underscore our ongoing commitment to the ‘and’ equation by continuing to meet the world’s needs for energy and essential products while reducing emissions. Pioneer will help us grow supply to meet the world’s energy needs with lower carbon intensity while Denbury improves our competitive position to economically reduce emissions in hard-to-decarbonize industries. Our disciplined operational and financial performance, combined with these strategic transactions, will strengthen our portfolio and position us to deliver profitable growth and attractive returns for many years to come.”

The firm entered into a definitive agreement to acquire Denbury a few months ago. The planned acquisition will provide ExxonMobil with one of the largest owned and operated carbon dioxide (CO2) pipeline networks in the United States. The combination will further expand the oil major’s ability to provide large-scale emission-reduction services to industrial customers. Denbury scheduled a shareholder vote for October 31, 2023, with the transaction expected to close in early November. The acquisition is an all-stock transaction valued at $4.9 billion, and the expected number of shares issuable in connection with the transaction is approximately 45 million.

After ExxonMobil reported profits of $9.1 billion, Global Witness analysis found that the company had paid dividends of $26 billion and repurchased shares worth $28 billion, giving shareholders a total of $54 billion since January 2022. The NGO claims that the oil major’s shareholder pay-outs in 2023, totaling $24 billion, could cover over a third of the $67 billion in damages caused by America’s natural disasters this year, including Hawaii’s wildfires and the floods, hurricanes, and tornados that have killed hundreds.

The other U.S. energy giant, Chevron reported earnings of $6.5 billion for the third quarter of 2023, compared with $6. billion in 2Q 2023 and $11.2 billion in the third quarter of 2022. The oil major outlined that a one-time tax benefit of $560 million in Nigeria and pension settlement costs of $40 million were included in this quarter while foreign currency effects decreased earnings by $285 million.

The company’s adjusted earnings were $5.7 billion in the third quarter of 2023, compared to adjusted earnings of $5.8 billion in 2Q 2023 and $10.8 billion in the third quarter of 2022. The earnings in 3Q 2023 decreased compared to the third quarter of 2022, primarily due to lower upstream realizations and lower margins on refined product sales. Chevron’s sales and other operating revenues in 3Q 2023 were $51.9 billion, down from $63.5 billion in the year-ago period primarily due to lower commodity prices.

Commenting on this, Mike Wirth, Chevron’s Chairman and CEO, stated: “We delivered another quarter of solid financial results and strong cash returns to shareholders. The acquisition of PDC Energy strengthened our position in important U.S. production basins. We also acquired a majority stake in ACES Delta, LLC, the United States’ largest green hydrogen production and storage hub. Chevron is delivering strong financial results while also investing to profitably grow our traditional and new energy businesses to drive superior value for shareholders.”

The U.S. player emphasizes that its earnings have exceeded $5 billion, and ROCE has been greater than 12% for nine consecutive quarters. As the cash returned to shareholders totaled $20 billion year-to-date, Chevron says this is 27% higher than last year’s record total for the same period. The firm’s worldwide net oil-equivalent production was up 4% from the year-ago quarter primarily due to the acquisition of PDC Energy.

The company’s capex in the third quarter of 2023 was up over 50% from the year-ago period, encompassing approximately $400 million of inorganic spend largely due to the acquisition of a majority stake in ACES Delta, but excludes the acquisition of PDC Energy. Chevron’s quarterly shareholder distributions were $6.2 billion during the quarter, including dividends of $2.9 billion and share repurchases of $3.4 billion.

Meanwhile, Global Witness analysis shows that Chevron has paid dividends of $19.5 billion and repurchased shares worth $23 billion, giving shareholders a total of $42 billion since January 2022 and the beginning of the global energy crisis. The NGO infers from this that the oil major’s shareholder pay-outs in the first nine months of this year alone are 20 times higher than the company’s entire 2022 investment in renewable energy.

Jonathan Noronha-Gant, Global Witness, Senior Campaigner, said: “Chevron executives could be turning oil money into clean energy, but they’d rather get rich. Chevron’s spending priorities, paying shareholders 20x times what they spent on renewables, make it clear that this company will play no role in the energy transition.”

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Last week, Chevron disclosed an agreement to purchase oil producer Hess in a $53 billion all-stock deal, committing the firm to fossil fuels for the long term, which did not sit well with climate activists.