Profits surge at Exxon and Chevron as economies rebound from pandemic

Oil & Gas industry updates

Profits surged at ExxonMobil and Chevron, America’s two oil supermajors, in the second quarter as the economic reopening drove energy prices higher, marking a big turnround from a crash last year that inflicted huge financial losses on the industry.

Exxon’s $4.7bn quarterly net profit — the most in more than two* years — easily beat Wall Street expectations and was up from a $1bn loss in the same quarter last year. Chevron reported quarterly net earnings of $3.1bn, also beating analyst expectations, and marking a sharp reversal of fortunes from a year before when it lost $8.3bn.

“Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our products,” said Darren Woods, Exxon’s chief executive.

Exxon said it was the best-ever quarter for its chemical and lubricants business amid booming demand and high prices for things such as plastic as the economy gathered momentum.

The strong earnings come weeks after the oil supermajors lost a series of closely watched climate-focused shareholder votes and have been under mounting pressure to step up investment in low-carbon energy. Exxon lost one of the fiercest proxy fights in corporate American history after the tiny hedge fund Engine No 1 won three seats on the oil company’s board.

Chevron said the $5.2bn in free cash flow it generated in the quarter would allow it to start buying back $2bn to $3bn in shares a year, a move that came earlier than expected and is seen as crucial to winning back investors after last year’s collapse. The company held its dividend steady at $1.34 a share.

“Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending,” said Mike Wirth, Chevron’s chief executive. “We will resume share repurchases in the third quarter.”

Exxon did not reinstate a share buyback scheme but instead focused on paying down debt, which ballooned during last year’s crisis.

Exxon shares were up about 0.6 per cent in pre-market trading. Chevron shares had risen about 1.4 per cent

Crude oil prices have surged to more than $70 a barrel in recent months as demand has picked up, boosting energy company share prices. Yet last year’s market collapse and long-term doubts about oil and gas demand as governments try to shift to cleaner fuels are weighing on Exxon and other leading producers.

Exxon’s shares are up more than 40 per cent this year, outpacing the broader market, but are trading about 30 per cent lower than the last time oil prices were at current levels in late 2018.

Chevron said on Thursday it was setting up a “new energies” business line, to be headed by Jeff Gustavson, a company veteran who is moving into the role from Chevron’s shale unit, which will focus on hydrogen, carbon capture and storage and carbon offsets. ExxonMobil set up its own low-carbon business earlier this year, focused on similar technologies.

The company plans to spend about $3bn on new low-carbon technologies through to 2028, much lower than some of its European competitors.

*This story has been amended to correct the size of Exxon’s quarterly net profit in comparison to previous quarters

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