ExxonMobil and Chevron feel bite of lower gas prices but multi-billion profits still in the bag

Two U.S. oil and gas heavyweights, ExxonMobil and Chevron, have joined their European counterparts in posting quarterly results affected by a global plunge in gas prices. However, these two oil majors have tucked under their belts $8.2 billion and $5.5 billion, respectively, in the first quarter of 2024. Both players are working on boosting their hydrocarbon production while enriching and expanding their decarbonization arsenal with additional emission reduction tools.

Since gas prices have been cut nearly in half compared to the high figures recorded in 1Q 2023, most oil majors have experienced a significant drop in profits for 1Q 2024, with Eni (€1.58 billion or almost $1.7 billion) and Equinor ($7.53 billion) seeing a 46% fall in net profits on a year-over-year (y-o-y) basis. TotalEnergies ($5.1 billion) has fared better than the Italian and Norwegian giants, as it saw a 22% slump in adjusted net profit y-o-y. Despite the downturn in gas prices, all oil majors have reported production growth during the quarter.

ExxonMobil disclosed earnings of $8.2 billion for 1Q 2024, which is $590 million higher than $7.6 billion in 4Q 2023 but $3.21 billion lower than $11.4 billion for the same period in 2023. The results for 1Q 2024 are said to show earnings’ decrease due to industry refining margins and natural gas prices coming down from last year’s highs to trade within the ten-year historical range. Other contributors to lower earnings include timing effects from unsettled derivative mark-to-market impacts and other primarily non-cash impacts from tax and inventory adjustments as well as divestments.

However, the U.S. giant is adamant that strong advantaged volume growth, primarily from Guyana and the Beaumont refinery expansion, and structural cost savings helped to offset lower base volumes from divestments, unfavorable entitlements and government-mandated curtailments, and higher expenses from scheduled maintenance.

The company generated a cash flow from operations of $14.7 billion and a free cash flow of $10.1 billion in 1Q 2024, compared to $13.7 billion and $8 billion in 4Q 2023. Exxonmonil’s 2023 shareholder distributions of $6.8 billion in the quarter included $3.8 billion of dividends and $3 billion of share repurchases. The annual pace of share repurchases is set to increase to $20 billion a year after the Pioneer transaction closes, assuming reasonable market conditions.

The U.S. player’s capital and exploration expenditures were $5.84 billion in 1Q 2024, a decrease of $1.92 billion from $7.8 billion in 4Q 2023 and a dip of $541 million from $6.38 billion in 1Q 2023. This is consistent with the company’s full-year guidance of $23 billion to $25 billion. The firm’s debt-to-capital ratio was 16% and the net-debt-to-capital ratio was 3%, reflecting a period-end cash balance of $33.3 billion. The oil major achieved $10.1 billion of cumulative structural cost savings versus 2019 with an additional $0.4 billion during the quarter and plans to deliver cumulative savings totaling $15 billion through the end of 2027.

Darren Woods, ExxonMobil’s Chairman and CEO, highlighted: “Our strategy and focus on execution excellence is creating significant value for society and our shareholders. We delivered a strong quarter with continued growth in advantaged assets, such as Guyana, where production continues at higher-than-expected levels, contributing to historic economic growth for the Guyanese people. In Product Solutions, our strong turnaround performance on cost and schedule helped drive record first-quarter refining throughput.

“Looking ahead, we’re making great progress on our plans to grow the earnings power of our existing businesses from investments in advantaged assets and higher-value products, and further reduce structural costs. We are investing in technology to transform the molecules derived from oil and natural gas into products that extend our reach into new, high-value, high-growth markets to capture even greater value from our core competitive advantages.”

ExxonMobil’s net production in 1Q 2024 was 3.8 million oil-equivalent barrels per day, a decrease of 40,000 oil-equivalent barrels per day compared to the fourth quarter. Excluding divestments, entitlements, and government-mandated curtailments, net production rose by 57,000 oil-equivalent barrels per day. On the other hand, net production was 47,000 oil-equivalent barrels per day lower than the same quarter last year with the growth in Guyana volumes more than offsetting the earnings impact from lower base volumes due to divestments, government-mandated curtailments, and unfavorable entitlement effects.

Excluding the impacts from divestments, entitlements, and government-mandated curtailments, net production grew 77,000 oil-equivalent barrels per day driven by the start-up of the Payara development in Guyana, which reached a nameplate capacity of 220,000 barrels per day in mid-January, ahead of schedule. The U.S. oil major’s production in Guyana is expected to be bolstered further by upcoming projects.

To this end, the firm announced a final investment decision for the Whiptail development, which is the sixth offshore project in Guyana that will add approximately 250,000 oil-equivalent barrels per day of gross capacity once it comes online by year-end 2027. The construction is underway on the FPSOs for the Yellowtail and Uaru projects, with the former anticipated to start production in 2025 and the latter targeted for 2026. A new oil discovery was also made this year in the Stabroek block.

According to ExxonMobil, operated methane emissions intensity has been curbed by more than 60% since 2016. The company is also investing in technology to extend its reach to new high-value, high-growth markets, including advanced recycling, ProxximaTM, carbon materials, and direct air capture of carbon dioxide. The oil major is convinced it is on track to more than double upstream earnings by 2027 vs. 2023 at $60/bbl real Brent with investments in assets such as those in Guyana, Permian, LNG, and Brazil.

Chevron revealed earnings of $5.5 billion for 1Q 2024, compared with $2.26 billion in 4Q 2023 and $6.57 billion in the first quarter of 2023. The U.S. giant outlined that foreign currency effects increased earnings by $85 million. The decrease in 1Q 2024 earnings compared to last year is said to be primarily due to lower margins on refined product sales and lower natural gas realizations, partly offset by higher upstream sales volumes in the U.S.

The U.S. player posted adjusted earnings of $5.4 billion for the first quarter of 2024, compared to adjusted earnings of $6.45 billion in 4Q 2023 and $6.74 billion in the first quarter of 2023. The capital expenditures (Capex) were $4.1 billion in 1Q 2024, compared with $4.4 billion in 4Q 2023 and $3 billion in 1Q 2023.

Chevron’s cash flow from operations (CFFO) in 1Q 2024 was $6.8 billion, compared to $12.4 billion in 4Q 2023 and $7.2 billion in the year-ago period. This was lower than a year ago mainly due to lower earnings and higher spending on expansion of the retail marketing network and asset retirements, partly offset by lower working capital.

Commenting on the 1Q 2024 results, Mike Wirth, Chevron’s Chairman and CEO, remarked: “We had another quarter of strong operational and financial performance and delivered superior cash returns to shareholders. U.S. production was up 35 percent from a year ago, and we continued to meet major project milestones.”

Furthermore, Chevron’s return on capital employed in 1Q 2024 was greater than 12%, as the company increased its dividend per share payout by 8% from 4Q 2023 and repurchased nearly $3 billion of its shares. The company returned $6 billion of cash to shareholders during the quarter, including dividends of $3 billion and share repurchases of nearly $3 billion. The firm’s board of directors declared a quarterly dividend of $1.63 per share, payable June 10, 2024, to all holders of common stock as shown on the transfer records of the corporation at the close of business on May 17, 2024.

As explained by the oil major, U.S. net oil-equivalent production rose by 406,000 barrels per day or 35% from a year ago period, primarily due to the acquisition of PDC Energy and sustained strong execution in the Permian and Denver-Julesburg (DJ) Basins. The company’s affiliate Tengizchevroil safely started up the Wellhead Pressure Management Project (WPMP) in April. In addition, the energy giant advanced its carbon capture value chain, hydrogen, and renewable fuels businesses during the quarter.

The U.S. player’s worldwide production was higher by 12% from a year ago period, primarily due to the acquisition of PDC and strong operational performance in the Permian and DJ Basins in the U.S. and the Tengizchevroil affiliate in Kazakhstan, partly offset by planned downtime in Nigeria. On the other hand, the firm’s net oil-equivalent production during the quarter was down 39,000 barrels per day from a year earlier, primarily due to a planned turnaround in Nigeria and normal field declines, partly offset by stronger operational performance at Tengizchevroil.

Based on Chevron’s data, the most significant business highlights in the quarter entail a final investment decision to add midstream infrastructure expected to boost production capacity at the Tamar gas field in Israel to 1.6 billion cubic feet per day and an agreement to assume a 60% operated interest in Uruguay’s AREA OFF-1 offshore exploration block, subject to customary closing conditions.

Additionally, the firm launched a $500 million Future Energy Fund III focused on venture investments in technology-based solutions that have the potential to enable affordable, reliable, and lower carbon energy and drilled onshore and offshore stratigraphic wells to delineate carbon dioxide storage potential through the company’s joint venture Bayou Bend CCS.

Chevron also confirmed its first solar-to-hydrogen production project that is expected to utilize solar power and non-potable water from existing assets in California.