- Both oil majors beat Wall Street estimates. Exxon earned an adjusted $4.23 a share against the $4.08 LSEG consensus on revenue of $113.2 billion versus $103.1 billion expected, while Chevron earned an adjusted $5.28 against $4.89 on revenue of $67.8 billion versus $61.6 billion. Both companies’ revenue came in roughly 10% above forecasts.
- Refining drove the jump. Chevron’s refining profit surged more than 300% to $4.9 billion from $1.1 billion, and Exxon’s refining division earned about $7.2 billion, more than the roughly $7.1 billion from its oil and gas production business. Exxon’s refining profit for the first nine months of the year reached $11.4 billion, up nearly 200% from $4 billion a year earlier.
- The plants ran at full tilt. Exxon’s Gulf Coast refineries operated at 100% utilization and produced record diesel volumes, while Chevron’s US refineries processed a record of just above 1 million barrels a day at 98% of capacity, with diesel and jet fuel yields up more than 10%.
- The backdrop is a global fuel shortage. Attacks by Ukraine, Iran and Houthi militants on refineries in Russia and the Middle East have knocked millions of barrels a day of capacity offline, and the US average diesel price has climbed to $6.32 a gallon, up more than 70% from a year ago, according to AAA.
What Happened?
Exxon and Chevron reported third-quarter results on Friday. Exxon’s net income doubled to $15.4 billion, or $3.72 a share, from $7.5 billion, or $1.76 a share, a year earlier, while Chevron’s rose nearly 200% to $9.9 billion, or $5.06 a share, from $3.5 billion, or $1.82 a share. Chevron’s oil and gas production business also earned $5.7 billion, up 70% from $3.3 billion a year ago. Chevron shares rose nearly 2% and Exxon gained more than 1% on Friday, with both stocks hitting all-time highs, according to CNBC.
Why It Matters?
Refining is normally the smaller, more cyclical side of an integrated oil company, but it has become the main profit engine as US plants fill the gap left by damaged refineries abroad. Exxon CEO Darren Woods said “refining capacity is very tight today” and that “diesel is the key crunch point,” because demand for the fuel is very inelastic and critical to economic growth. The majors are earning more even as output slips: Chevron’s production dipped to 3.9 million barrels a day from about 4 million a year earlier, and Exxon has averaged about 4.5 million barrels a day this year versus nearly 4.7 million in the same period last year. European rival BP reported $8.5 billion in underlying profit on Friday, nearly quadruple a year earlier, on high refining margins.
What’s Next?
Chevron CEO Mike Wirth said “the system is under stress” and the global environment is “fairly fragile,” so the size of future refining profits depends on how long foreign refinery outages last. The windfall is also politically sensitive: President Donald Trump said in August that Chevron and Exxon were “making too much money based on a shortage,” and that pressure could build if diesel stays above $6 a gallon. Investors will also watch crude, with US WTI up 2% to $104.04 a barrel and Brent up 2.3% to $117.50 on Friday, both on pace for another monthly gain.
