ExxonMobil and Chevron amass over $57 billion in profits during 2023 while new acquisitions fuel portfolio growth

U.S. oil and gas majors ExxonMobil and Chevron have raked in huge profits over the course of the past year, recording $36 billion and $21.37 billion, respectively. However, these multi-billion-dollar profits are still significantly lower than all-time high ones of $55.7 billion and $35.5 billion, which were observed in 2022. The drop in the energy giants’ combined profits from $91.2 billion in 2022 to $57.37 billion in 2023 is a by-product of the global downturn in oil and gas prices. The series of new acquisition moves the duo made in 2023 lend weight to the U.S. players’ plans to up the production ante in a bid to meet the rise in future energy demand.

As the oil majors’ results for 2023 slowly trickle in, the difference between record-high profits in 2022 and the amounts made last year is glaringly obvious. However, the energy giants have still done well for themselves based on the figures reported for 2023. While Shell’s annual profit fell by 29% on a year-over-year basis in 2023, the UK player still reported a profit of $28 billion. An analysis of the firm’s highest-ever annual profit of almost $40 billion in 2022 leads to the conclusion that the decrease is driven by the shifts in global energy markets, putting the limelight on the downward trend in oil and gas prices and the upswing in LNG trading.

Despite the lower results compared to 2022, Shell still raked in billions in profit, which did not sit well with climate and environmental activists, like Greenpeace UK. In line with this, Common Wealth claims that Shell spent $2.68 billion on renewables, $12.54 billion on fossil fuels, and $23.77 billion on shareholder payouts in 2023. While pointing the finger at the oil major for “doubling down on fossil fuels” instead of signing up to a pivot to net zero, the think tank underlined that the UK player paid out nearly £154 billion to shareholders since 2010, making its priority clear – “maximizing returns for investors.” All oil majors have been accused of the same.

A spokesperson for Shell recently told Global Witness: “Global energy demand will continue to grow and be met by different types of energy, including oil and gas, for some time to come. The pace of transition depends on action in many areas, including government policy, changing customer demand and investment in low-carbon energy. Our aim is to play our part in a balanced energy transition, where the world achieves net-zero emissions without compromising on delivery of secure and affordable energy which has improved so many lives, and which people will continue to need today and for many years to come.” 

ExxonMobil and Chevron have also come face to face with fierce opposition to their oil and gas agendas with climate campaigners doing their utmost to disrupt those fossil fuel plans. In July 2023, Global Witness underscored in its analysis that these two oil majors were fueling America’s record-breaking heatwaves, placing them into the same boat as “the world’s top carbon emitters.”

May Boeve, Executive Director of 350, stated: “Oil and gas producers have made their wealth at the expense of people living at the forefront of climate impacts. Instead of using their massive wealth to support the transition to renewable energy that will meet our 1.5C target, the fossil fuel industry tries to sell unproven decarbonization technologies like carbon capture and storage that risks extending the world’s reliance on oil and gas.”

Last year, Global Witness claimed that Chevron and ExxonMobil released an estimated 445 million tons of carbon during the first half of 2023, which put the companies among the world’s top contributors to climate change in its view.

Cara Jenkinson, Cities Manager at Ashden, said: “The only way to slash emissions from usage of oil and gas is to cut demand – governments across the world must speed up their electrification plans, with poorer nations being supported to bypass fossil fuel vehicles and ramp up clean renewable energy production.” 

ExxonMobil announced on Friday, February 2, 2024, its 4Q 2023 earnings of $7.6 billion, compared to $9.1 billion in 3Q 2023 and $12.75 billion for the same period in 2022. The results for 4Q 2023 include unfavorable identified items of $2.3 billion including a $2 billion impairment as a result of regulatory obstacles in California that have prevented Santa Ynez production and distribution assets from coming back online. These impairments were partly offset by favorable tax and divestment-related items. Earnings excluding identified items were $10 billion.

While the firm’s results strengthened on favorable derivative mark-to-market impacts, improved volume and mix driven by advantaged Guyana and Permian assets, and stronger chemical margins, these factors were partly offset by lower industry refining margins and seasonally higher expenses. The U.S. giant explained that its full-year 2023 earnings were $36.01 billion compared with $55.74 billion in 2022, a decrease of $19.73 billion. The debt-to-capital ratio was 16%, and the net-debt-to-capital ratio was 5%, reflecting a period-end cash balance of $31.6 billion.

The company generated strong cash flow from operations of $13.7 billion and a free cash flow of $8 billion in 4Q while cash increased by $1.9 billion for the full year 2023 with a free cash flow of $36.1 billion. Exxonmonil’s 2023 shareholder distributions of $32.4 billion included $14.9 billion of dividends and $17.4 billion of share repurchases. In addition, a first-quarter dividend of $0.95 per share has been declared and is payable on March 11, 2024. Along with the 4% increase in fourth-quarter dividend, the company has boosted its annual dividend for 41 consecutive years.

The company’s capital and exploration expenditures were $7.8 billion in the fourth quarter of 2023, bringing full-year 2023 investments to $26.3 billion, compared to $7.5 billion in the fourth quarter of 2022 and $22.7 billion for the full-year 2022. The figures for 2023 are slightly above the top end of the guidance range, as the company opportunistically accelerated activities in the advantaged Permian and Guyana assets, and entered a new lithium business.

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Darren Woods, ExxonMobil’s Chairman and CEO, highlighted: “Our consistent strategy and execution excellence across the business delivered industry-leading earnings and enabled us to return more cash to shareholders than our peers in 2023. These results demonstrate the fundamental improvements we’ve made to our business, reflecting our progress in high-grading our portfolio through investments in advantaged projects and select divestments, while, at the same time, driving a higher level of efficiency and effectiveness throughout the business.”

ExxonMobil disclosed that net production in 4Q 2023 was 3.8 million oil-equivalent barrels per day, an increase of 136,000 oil-equivalent barrels per day compared to the prior quarter on favorable entitlement effects and growth in Permian and Guyana. Payara, the third Guyana development, came on stream in November 2023 ahead of schedule with production reaching a nameplate capacity of 220,000 barrels per day in mid-January 2024. As a result, higher volumes, improved mix, and stronger gas realizations more than offset lower crude realizations, unfavorable tax impacts, and year-end inventory effects.

The company highlighted that net production was flat compared to the same quarter last year but net production in 2023 was 3.7 million oil-equivalent barrels per day, in line with the prior year. While production increased 111,000 oil-equivalent barrels per day, excluding impacts from divestments, entitlements, and government-mandated curtailments, Permian and Guyana combined production grew 18% versus 2022.

Thanks to the merger with Pioneer Natural Resources, which was disclosed in October 2023 as a $59.5 billion all-stock transaction, double-digit returns are expected by recovering more resources, more efficiently, while accelerating emissions reductions. The transaction is expected to close in the second quarter of 2024, pending regulatory and Pioneer shareholder approval.

Furthermore, ExxonMobil made strides in reaching net zero GHG emissions by 2030 in the Permian Basin during 2023 by electrifying its drilling fleet and replacing over 6,000 natural gas-driven pneumatic devices in its unconventional-operated assets. Aside from this, the firm deployed its first electric fracturing units to further curb emissions intensity and signed additional long-term agreements enabling renewable power capacity to support operations.

In a bid to advance climate solutions, ExxonMobil launched a high-altitude monitoring balloon with advanced imaging technology and data processing platforms. This has the potential to provide continuous, real-time methane detection, supporting the U.S. giant’s plans to achieve net-zero Scope 1 and 2 emissions from its unconventional operations in the Permian by 2030.

These decarbonization efforts were further bolstered by the completion of the acquisition of Denbury for $4.8 billion of ExxonMobil stock, based on the share price at closing, enabling the portfolio of the largest owned and operated carbon dioxide (CO2) pipeline network in the United States at 1,300 miles, including nearly 925 miles in Louisiana, Texas, and Mississippi – one of the largest U.S. markets for CO2 emissions. The company also has access to more than 15 strategically located onshore CO2 storage sites.

Woods said at the APEC Summit in San Francisco last year that the plan to tackle climate change and energy demands would need to go beyond expanding wind, solar, and EVs. According to ExxonMobil’s CEO, the world needs to commit to solving its “energy and emissions challenges simultaneously” to bridge the global North-South divide. 

Meanwhile, Chevron revealed earnings of $2.3 billion for 4Q 2023, compared with $6.53 billion in 3Q 2023 and $6.35 billion in the fourth quarter of 2022. The U.S. giant outlined that $1.8 billion of U.S. upstream impairment charges and $1.9 billion of decommissioning obligations from previously sold assets in the U.S. Gulf of Mexico were included in the quarter while foreign currency effects decreased earnings by $479 million.

The U.S. player posted adjusted earnings of $6.5 billion for the fourth quarter of 2023, compared to adjusted earnings of $5.72 billion in 3Q 2023 and $7.9 billion in the fourth quarter of 2022. Chevron’s sales and other operating revenues in 4Q 2023 were $48.93 billion, compared to $54.52 billion in the year-ago period. The company also reported full-year 2023 earnings of $21.37 billion, compared with $35.46 billion in 2022.

Chevron’s adjusted earnings were $24.69 billion in 2023 compared to adjusted earnings of $36.54 billion in 2022. According to the U.S. oil major, the reported earnings declined compared to the year before primarily due to lower upstream realizations, losses from decommissioning obligations for previously sold assets in the U.S. Gulf of Mexico, higher U.S. upstream impairment charges mainly in California, and lower margins on refined product sales.

Commenting on this, Mike Wirth, Chevron’s Chairman and CEO, remarked: “In 2023, we returned more cash to shareholders and produced more oil and natural gas than any year in the company’s history. We also strengthened our portfolio with traditional and new energy acquisitions to help meet the growing demand for affordable, reliable, and ever-cleaner energy.”

Chevron underlined that cash returned to shareholders totaled over $26 billion for 2023, 18% higher than the previous year’s record total, and annual worldwide net oil-equivalent production increased to over 3.1 million barrels of oil-equivalent per day, led by 14% growth in the United States. Last year, the company completed several acquisitions, including PDC Energy, a majority stake in ACES Delta, and signed an agreement to acquire Hess Corporation.

The U.S. firm claims that its worldwide and U.S. net oil-equivalent production set new annual records. While the worldwide production was up 4% from a year ago primarily due to the acquisition of PDC Energy and growth in the Permian Basin, which was up 10% over 2022, the firm also added approximately 980 million barrels of net oil-equivalent proved reserves in 2023, which are subject to final reviews, that equate to 86% of net oil-equivalent production for the year.

Based on Chevron’s data, the largest net additions were from acquisitions in the United States, and extensions and discoveries in the Permian Basin while the largest net reductions were from revisions in the Permian Basin, east Texas, and California. The U.S. player’s international net oil-equivalent production of 1,794 mboed during 4Q 2023 was down 25,000 barrels per day from a year earlier primarily due to normal field declines.

On the other hand, U.S. net oil-equivalent production of 1,598 mboed was up 34% from the fourth quarter of 2022, primarily due to the acquisition of PDC, which added 266,000 oil-equivalent barrels per day during the quarter, and higher production in the Permian Basin.

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Chevron’s cash flow from operations in 2023 was $35.6 billion, compared with $49.6 billion in 2022, mainly due to lower commodity prices and lower margins on refined product sales. Over the past three years, the company has generated over $110 billion in cash flow from operations and nearly $80 billion of free cash flow.

In addition, the capital expenditures were $15.8 billion in 2023, compared with $12 billion in 2022, up 32% from last year primarily due to higher investments in the United States. The U.S. firm eliminated over $4 billion of debt, including all debt assumed in the PDC acquisition, resulting in a net debt ratio of 7.3%.

Chevron’s CEO recently hammered home the importance of continued oil and gas production by explaining that worldwide demand for natural gas and oil would grow through the decade’s end. He also added that the U.S. oil major was expanding its traditional energy business while investing in technologies to meet the demand for new energies.

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