Surging oil prices due to the Iran war did not result in a windfall for Exxon Mobil and Chevron in the first quarter.
The two biggest U.S. oil companies reported profits on Friday that fell dramatically compared to the same period last year. Exxon’s net income declined 45%, while Chevron’s tumbled 36%.
Exxon shares were up more than 1% in premarket trading while Chevron’s gained about 2%, as they both beat Wall Street’s earnings estimates.
Oil prices had been depressed during the first two months of the year as the market anticipated a surplus, but suddenly spiked after the U.S. and Israel attacked Iran on Feb. 28. Prices have surged 57% as the war has caused the largest oil supply disruption in history.
“The global energy system continues to be under extreme stress,” Chevron CEO Mike Wirth told CNBC in an interview. Wirth said the world will face rising oil prices until the Strait of Hormuz is reopened.
Here’s how Exxon and Chevron did compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Exxon posted adjusted earnings of $1.16 per share, beating estimates.
- Exxon posted revenue of $85.14 billion, beating estimates of $82.18.
- Chevron posted adjusted earnings of $1.41 per share, beating estimates of 95 cents per share.
- Chevron reported revenue of $48.61 billion, missing estimates of $52.1 billion
Exxon warned earlier in the month the Iran war would weigh on its results. It has open financial hedges that proved unfavorable in the quarter as the war triggered a sudden and massive supply disruption.
Exxon lost nearly $4 billion on these trades due to what it described as a “timing effect.” The value of the product shipments that it hedged were not counted in the quarter because their delivery was not complete.
The impact, however, is temporary and the hedges will ultimately result in a net profit in subsequent quarters after the products are delivered, Exxon said. It also took a $700 million hit on closed hedges that were not offest by physical deliveries due to the Middle East disruption.
As a result, Exxon posted net income of $4.2 billion, or $1.00 per share, down from $7.7 billion or $1.76 per share last year. Excluding the negative timing effects and the other items, it earned $8.8 billion, or $2.09 per share. Removing the $700 million hit, Exxon earned $1.16 per share.
Chevron posted a profit of $2.2 billion, or $1.11 per share, in the quarter down from $3.5 billion, or $2 per share, one year ago. It booked a $2.9 billion charge related to its financial hedges.
After adjustments, Chevron earned $1.41 per share to beat Wall Street’s estimates of 95 cents. It was the biggest earnings beat since October 2020.
Exxon’s refining segment was particularly hard hit, posting a loss of $1.26 billion due to the timing effects on financial hedges not offset by physical deliveries. Excluding those effects, its refiners posted a profit of $2.8 billion, a more than 200% increase over $856 million in last year’s quarter.
Chevron’s U.S. refiners posted a profit of $196 million, an increase of 90% over $103 million last year, as they operated at record crude througthathput in March. Its international refiners posted a loss of about $1 billion due to lower margins, timing effects on financial hedges, and higher transportation costs. A year ago, the international refining business earned $222 million.
This is a developing story. Please check back for updates.
