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The two largest US oil companies reported profits on Friday that fell dramatically compared with the same period last year. Exxon’s net income declined 45%, while Chevron’s net income declined 36%.
Exxon shares rose more than 1% in premarket trading, while Chevron shares rose nearly 2%, as both beat Wall Street earnings estimates.
Oil prices had been low during the first two months of the year as the market expected a surplus, but prices suddenly rose after the US and Israel attacked Iran on February 28. Prices have risen 57% since the war caused the largest oil supply disruption in history.
“The global energy system remains under extreme stress,” Chevron CEO Mike Wirth told CNBC in an interview. Wirth said that until the Strait of Hormuz reopens, the world will face rising oil prices.
Based on a survey of LSEG analysts, Exxon and Chevron performed in line with Wall Street expectations:
- Exxon reported adjusted earnings of $1.16 per share, beating estimates.
- Exxon reported revenue of $85.14 billion, beating estimates of $82.18.
- Chevron reported adjusted earnings of $1.41 per share, beating estimates of 95 cents
- Chevron reported revenue of $48.61 billion, missing estimates of $52.1 billion
Exxon warned earlier in the month that the Iran war would impact the outcome. It has open financial hedges which proved unfavorable in the quarter as the war caused sudden and massive supply disruptions.
Exxon lost approximately $4 billion due to “timing effects” in these trades. The value of product shipments that it had hedged were not counted in the quarter because their delivery was not completed.
Exxon said, however, the impact is temporary and the hedges will ultimately result in net profits in subsequent quarters after delivery of products. There were also $700 million losses on closed hedges not affected by physical deliveries due to the Middle East disruption.
As a result, Exxon reports net income $4.2 billion, or $1.00 per share, down from $7.7 billion, or $1.76 per share, last year. Excluding negative timing effects and other items, it earned $8.8 billion, or $2.09 per share. Excluding the $700 million hit, Exxon earned $1.16 per share.
Chevron posted Profit of $2.2 billion, or $1.11 per share, in the quarter declined from $3.5 billion, or $2 per share, a year earlier. It booked a $2.9 billion charge related to its financial hedges.
After adjustments, Chevron earned $1.41 per share, beating Wall Street’s estimate of 95 cents. This was the company’s biggest earnings since October 2020.
Exxon’s refining segment was particularly badly hit, suffering a $1.26 billion loss due to timing effects on financial hedges that were not offset by physical deliveries. Excluding those impacts, its refiners made a profit of $2.8 billion, up 200% from $856 million in the same quarter last year.
Chevron’s U.S. refiners posted a profit of $196 million, up 90% from last year’s $103 million, as they posted record crude throughput in March. Its international refiners reported losses of nearly $1 billion due to lower margins, timing effects on financial hedges and higher transportation costs. A year ago, the international refining business had earned $222 million.
This is a developing story. Please check back for updates.
