Exxon, Chevron Beat Estimates, Report Second-Biggest Annual Profits In Past Decade

One wouldn't know it from their stock price today, which has been slammed by tech bros shorting anything that does not mention AI at least 100 times in its press release/conference so they can fund their purchase of META 20% higher on the day, but in a time when two-thirds of US companies do not generate any GAAP profits, two of America's cash flow titans - ExxonMobil and Chevron - reported their second-biggest annual profits in a decade thanks to surging oil production which offset a slide in prices that tempered earnings from the records hit in 2022.

At a time when OPEC+ and Saudi Arabia has been hurting due to a flood of oil by US companies, America’s oil supermajors increased output sharply in their own backyard in 2023, pursuing a strategy of doubling down on oil and gas that has prompted blowback over their commitment to cutting emissions .

Exxon posted full-year net income of $36bn, down from $55.7bn the previous year due to a $17.9BN drop in price/margin, but otherwise its biggest since 2012 as Exxon CFO Kathryn Mikells hailed a “great end to a great year”.

It also generated $55BN in cash from operations and returned $32.5BN to shareholders in the form of dividends and buybacks.

Also, as noted previously, Exxon’s nascent trading operation earned more than $1 billion in the last three months of 2023, an early sign the company’s expansion strategy is paying off. Exxon posted a $1.14 billion gain from trading for the fourth quarter, helping cushion the $410 million blow inflicted by lower oil prices and fuel production, the company said Friday. The company’s trading strategies were particularly successful in crude oil and refined-products markets, said Chief Financial Officer Kathy Mikells.

Exxon's smaller peer, Chevron, reported net income of $21.4bn, down from $35.5bn the previous year, but otherwise its strongest since 2013.

Exxon’s net income for the fourth quarter was $7.6bn compared with $12.8bn the previous year. Chevron’s fell from $6.4bn to $2.3bn. Both companies were hit by writedowns flagged in January relating to paring back investment in California, where moronic regulators have taken a strong line against fossil fuel producers.

Bottom line: both companies beat earnings forecasts as bigger-than-expected oil output from shale fields helped cushion the blow from weakening crude prices.

Here are give key takeaways from Exxon's earnings, courtesy of Bloomberg:

1. Exxon is “well ahead” of its plan to double earnings-per-share from 2019 to 2027 at constant oil prices, CFO Kathy  Mikells said
2. Executives pushed back on analysts’ concerns about Exxon’s high fourth-quarter capital spending. The company sometimes needs to front-load spending to take advantage of opportunities, with Guyana and the Permian benefiting from this approach, CEO Darren Woods said.
3. Trading profits will be “embedded” into Exxon’s earnings going forward, but will bounce around quarter-to-quarter, Woods said. The company is still focused on trading around its assets rather than speculative bets
4. Woods and Mikells highlighted Exxon’s strong project “execution,” which comes in marked contrast to peers that have struggled with major developments, like Chevron
5. Chemicals will be “marginally better” this year than in 2023, but there won’t be a radical improvement, Woods said. Exxon’s new projects are both earnings and cash flow positive in the current environment, he said

And here is Chevron:

1. No new delays at Tengiz, a critical megaproject in Kazakhstan; Chevron is on track for full startup in 2025, at which point it will “generate a lot of cash,” CFO Pierre Breber says
2. Capital spending in the Permian Basin shouldn’t increase much more than the current $5 billion even as Chevron ramps from 867,000 barrels a day to 1 million barrels a day through next year
3. The $10 billion to $15 billion of assets flagged for sale after the Hess transaction are more likely to come from Chevron’s legacy portfolio than the acquired company, CEO Mike Wirth said.
4. Permian performance was much improved in the fourth quarter, especially drilling times, easing concerns from earlier in the year
5. Chevron will continue to buy back shares consistently and not only when profits are healthy, CFO Breber says. The company bought back 5% of its outstanding stock last year, more than in 2022 when it had record profits.

While high commodity prices in the wake of Russia’s full-scale invasion of Ukraine pushed oil and gas companies globally to record profits in 2022 before receding last year, the steep drop in 2023 depressed revenues and profits, but in the end both US supermajors managed to more than offset what would have been a far worse outcome by increasing domestic production contributing to a boom in American output that took the market by surprise and helped keep a lid on prices even as the Opec+ group of oil exporters implemented substantial production cuts.

According to the DOE, the US pumped 13.3mn barrels of oil a day in November, more than any country in history and despite a sharp drop in operating wells. Much of the production growth has focused on the sprawling Permian Basin, which stretches across Texas and New Mexico, and where Exxon recently acquired giant shale driller, Pioneer Natural Resources which dominates the Midland Basin.

Exxon said combined 2023 output in the Permian and Guyana — where it has a stake in the biggest oil discovery of the past decade — was up 18%. Its overall US oil output rose to 851,000 barrels a day during the quarter from 789,000 b/d a year ago.

Chevron increased its Permian production by 10% in 2023, despite struggles with the productivity of ageing wells in the oilfield earlier in the year. It produced 1.16mn b/d in the US in the quarter versus 895,000 b/d previously, boosted in part by its acquisistion of PDC Energy.

“We had a strong quarter and it was really led by record production in the Permian,” Chevron’s chief financial officer Pierre Breber told the Financial Times. “There’s always things that are happening — it’s a big business — but we delivered on the plan.”

Unlike their woke, and increasingly more broke, European rivals which have idiotically shifted to renewable sources such as wind and solar, Exxon and Chevron have committed to increasing oil and gas production; to that end, both companies in October announced megadeals to acquire rivals, which are being reviewed by US regulators. Exxon announced it is buying Pioneer Natural Resources, the biggest producer in the Permian, for $60bn, while Chevron is paying $53bn for Hess, giving it access to the Guyana discovery as well as assets in the Bakken shale of North Dakota.

Sensing that the time of global ESG idiocy is over, Exxon recently took the unusual step of suing climate activists to block an emissions resolution from appearing at its annual meeting, arguing the regulators have been too lax in allowing repeat motions on to the ballot.

“We support the right of investors to bring proposals, but the process to get proxy proposals excluded is just flawed, with activists that are masquerading as investors who make the same proposals year after year that are garnering only minimal support along the way,” said Mikells.

Both companies ratcheted up capital expenditure during the year as Wall Street eased constraints on the industry’s ability to spend. Exxon’s outlay rose from $22.7bn to $26.3bn, while Chevron’s was up from $12bn to $15.8bn. They also ramped up share buybacks and dividends following last year’s profit haul, distributing $32.4bn and $26.3bn, respectively, to investors.

Shares in both companies rose about 2 initiall in pre-market trading, but have since dripped in the red as idiots short their stock to fund purchases of such AI bubbles as META and NVDA.