Why Investors Were More Concerned with One: Exxon and Chevron Q3 Earnings Slump Explained

Less than a month after they each announced major acquisitions, the two largest U.S. oil giants reported sluggish third-quarter earnings Friday. But investors responded less harshly to ExxonMobil’s results than they did to Chevron’s—perhaps because of Chevron’s lagging production business.

Though earnings for both companies plummeted from last year’s lucrative third quarter, each reported an increase on a quarter-to-quarter basis. Exxon’s profit, though, rose at almost twice the rate of its leading rival.

Shares of Exxon, the largest U.S. oil producer, rose as much 2.1% in early trading Friday before sliding to decline as much as 2.28% after the company said its third-quarter net income at $9.1 billion, or $2.27 per share, was off 54% from the same quarter in 2022.

Chevron’s shares, meanwhile, plunged more than 6% Friday after the No. 2 U.S. producer said its net profit fell 42% from the same period a year ago to $6.5 billion, or $3.05 per share on an adjusted basis. The per-share results missed consensus expectations by 28 cents.

Exxon Rides Refining Output, Rising Oil Prices

To put the numbers in perspective, ExxonMobil’s earnings dropped from a time last year when oil and natural gas prices soared after Russia’s invasion of Ukraine, generating its most profitable quarter ever. Per-share results, excluding one-time items, fell 10 cents short of analysts’ consensus estimates.

Exxon said its net income increased 15% from this year’s second quarter. In the recently completed quarter, its refineries produced more fuel than during any previous peak summer driving season since Exxon and Mobil merged in 1999. The surging fuel production coincided with rising refinery margins.

Meanwhile, profit in Exxon’s upstream production segment, accounting for two-thirds of its business, rose 34% from the prior quarter. That increase reflected global oil prices that during the quarter rose to $92 per barrel from $75.

Three-quarters of Exxon’s production occurs outside the U.S., and earnings in that business increased 25% from the second quarter. U.S. production profit, however, soared 69%.

Chevron’s Production Profit Lags

Chevron reported that its earnings increased 8.5% from the second quarter. As with Exxon, higher margins boosted results for the company’s refinery operations.

But the company’s production earnings, accounting for the vast majority of its overall profit, didn’t match the gains posted by Exxon. Earnings in Chevron’s upstream production segment only increased 17% from the second quarter, despite the substantial increase in oil prices.

In particular, profit in Chevron’s non-U.S. production segment, accounting for about two-thirds of its total output, increased just 12% from the second quarter. Its U.S. production earnings increased 26%, but that significantly trailed the growth in Exxon’s U.S. production segment.

In addition, Chevron posted a $912 million loss, more than double that of the second quarter, in activities related to cash management, debt financing, insurance, real estate, and technology. Negative currency effects accounted for the wider loss in the recently completed quarter, the company said.

Oil Giants Bank On Deals To Boost Production

Friday’s earnings reports came just four days after Chevron announced it has agreed to buy Hess Corp. in a $53 billion, all-stock deal. Two-and-a-half weeks ago, Exxon disclosed a similar all-stock deal with its plan to buy Pioneer Natural Resources for almost $60 billion.

Both deals target increased domestic production for oil companies that currently rely on production outside the U.S. for the bulk of their earnings. International production results cooled their third-quarter results, especially at Chevron.