Exxon Mobil and Chevron beat analysts’ estimates for earnings, production and sales, as rising oil production from the Permian Basin helped offset weaker crude oil prices.
On Friday, Exxon’s adjusted third-quarter earnings beat expectations by five cents, while Chevron beat estimates by 11 cents. Shares rose 1.5% and 4%, respectively.
The strong results supported the companies’ commitment to continue rewarding investors with large buybacks and payouts, in contrast to European rival BP Plc. which earlier this week warned that fluctuating oil prices could jeopardize some share buybacks. Shell Plc and TotalEnergies SE have not wavered on their buyback promises, although the French oil giant said its pace of purchases depends on “reasonable market conditions.”
Despite the 20% drop in oil prices since early April, Exxon had enough cash flow to cover third-quarter payments, while Chevron fell short, forcing the oil giant to resort to debt.
Exxon is the world’s best-performing oil major this year, up more than 15%, even as international crude oil prices fell. North America’s largest energy exploration company demonstrated that it has higher oil and natural gas production growth (and at a lower cost) than its peers.
Exxon raised its dividend for the 42nd consecutive year to 99 cents per share, above Bloomberg’s dividend projection of 97 cents.
Exxon was able to “fully fund” dividend payments and share buybacks with cash flow without resorting to debt, Chief Financial Officer Kathy Mikells said during an interview.
The company also has a cash reserve of $27 billion and a net debt-to-equity ratio of just 5%, which leaves it in a “solid position” against any downturn in the oil market, he said.
“We’ve done a lot of work to fundamentally improve the underlying earnings power of the business and that’s going to leave us in a very good position,” Mikells said.
Exxon’s fast-growing oil projects in Guyana and the Permian Basin are producing crude for less than $35 a barrel at a time when a barrel sells for more than $70 a barrel.and Exxon is working on several gas export projects in Texas, Papua New Guinea and Mozambique. It is now the largest producer in the Permian region after its $60 billion acquisition of Pioneer Natural Resources Co. earlier this year.
As for Chevron, the explorer hopes to close asset sales in Canada, Congo and Alaska by the end of the year as part of a plan to raise up to $15 billion in divestitures by 2028. The driller also aims to reduce costs by up to $3 billion by the end of 2026.
Chevron’s oil and natural gas production rose 7% from a year ago, and production in the U.S. Permian Basin hit a new quarterly record. Production also began at Anchor, the first in a series of new investments in the Gulf of Mexico.
Third-quarter dividends and buybacks totaled $7.7 billion, exceeding $5.6 billion of free cash flow for the period.
Earlier this year, Chevron pledged to buy back $17.5 billion in shares annually, or about 6% of its market value. making it one of the largest share buybacks in the industry. Management has indicated that it is willing to finance the payment with borrowed money if necessary because the company’s debt is currently well below its medium-term target.
But Citigroup Inc. analysts said the exploration companies with the biggest buybacks, such as Chevron and Equinor ASA, they might “have to readjust distributions” in response to lower oil prices. “These stories of negative exchange rates will be seen as a problem for some investors,” Citi’s Alastair Syme wrote in an Oct. 23 note.
Chevron shares have underperformed Exxon’s this year amid an arbitration battle that has stalled the $53 billion deal to buy Hess Corp. New projects in the Gulf of Mexico and Kazakhstan will generate significant cash flow starting next year, but in the meantime Chevron relies heavily on the Permian Basin, where about half of its position involves stakes in wells operated by other companies. .
The company has also been embroiled in a high-profile dispute with the state of California over refining regulations that it claims drive up gasoline costs and prices. Chevron announced plans to move its corporate headquarters to Houston from the San Francisco Bay Area earlier this year after 145 years of being headquartered in the Golden State.
