The soaring oil prices caused by the Iran war were not a windfall benefit for the United States. exxon mobil and chevron In the first quarter.
The two largest U.S. oil companies reported sharp profits Friday compared with the same period a year ago. Exxon’s net income fell 45%, while Chevron’s fell 36%.
It beat Wall Street’s earnings expectations for the quarter. Shares of both companies fell more than 1% on Friday as oil prices fell during trading.
Oil prices were low in the first two months of the year as markets expected a surplus, but suddenly soared after the US and Israel attacked Iran on February 28th. Prices rose 57% as the war caused the biggest oil supply disruption in history.
Exxon has announced that if the Strait of Hormuz is closed for the entire second quarter, production in the Middle East will decrease by 750,000 barrels per day compared to 2025. The company said throughput to refiners would decrease by 3%.
CEO Darren Woods told CNBC that about 15% of Exxon’s production was affected by the war. Woods said it could take up to two months after the strait reopens for crude oil to increase. It also takes about a month for barrels shipped from the Persian Gulf to reach customers, he said.
Here’s how Exxon and Chevron’s performance compares to Wall Street expectations, based on a survey of analysts by LSEG.
Exxon reported adjusted earnings per share of $1.16, beating estimates by $1.00 per share. Exxon posted revenue of $85.14 billion, beating estimates of $82.18. Chevron reported adjusted earnings of $1.41 per share, beating estimates by 95 cents per share. Chevron reported revenue of $48.61 billion, $52.1 billion less than expected.
Exxon redeployed about 13 million barrels during the war to markets that needed it most, Woods said. But the CEO said the move had a negative accounting impact on Exxon’s first-quarter earnings.
Exxon’s trading division introduced financial hedges to lock in profits from these barrels. However, since the shipment was still on its way to its destination, it was not counted in this quarter.
This means the hedge was not offset by proceeds from delivery, resulting in a loss of about $4 billion in the quarter due to what Exxon called a “timing effect.” Exxon said the impact is temporary and that the hedge will result in a net profit in the next quarter after product delivery.
“You get this deferred profit,” Woods said. “We wanted our investors to understand that the work we’re really doing to meet today’s demands is delivering benefits that won’t necessarily be recorded this quarter.”
Exxon also took a $700 million hit on closed hedges that was not offset by physical deliveries due to the Middle East turmoil.
As a result, Exxon’s net income was $4.2 billion, or $1.00 per share, down from $7.7 billion, or $1.76 per share, in the same period last year. Excluding timing and other items, the company had profit of $8.8 billion, or $2.09 per share. Excluding the $700 million hit, Exxon earned $1.16 per share.
Chevron is less exposed to war than its peers, CEO Mike Wirth said. The company also has operations in Saudi Arabia, Kuwait and Israel, but they are small compared to Chevron’s large presence in the Americas, Asia and Africa, he said.
“The impact of events in the Middle East on our company is relatively small compared to other companies,” Wirth said in an interview with CNBC.
Chevron’s profit for the quarter was $2.2 billion, or $1.11 per share, down from $3.5 billion, or $2 per share, a year ago. Although the impact of the war was small, we recorded a charge of $2.9 billion related to financial hedging.
On an adjusted basis, Chevron earned $1.41 per share, beating Wall Street’s consensus estimate of 95 cents. This was the largest increase in profit since October 2020.
Exxon refiners were particularly hard hit, posting a $1.26 billion loss due to timing effects on financial hedges that were not offset by physical delivery. Excluding these impacts, the company’s refineries reported a profit of $2.8 billion, an increase of more than 200% from $856 million in the year-ago period.
The Chevron refiner swung to a loss of $817 million, compared with a profit of $325 million a year earlier, due to lower margins, timing impacts on financial hedging and higher transportation costs.
Exxon’s manufacturing division’s profit was $5.74 billion, down 15% from $6.76 billion in the year-ago period. It pumped 4.6 million barrels per day in the quarter, a slight increase compared to the same period last year.
Chevron’s manufacturing division’s profit was $3.9 billion, up just 4% from $3.8 billion in the year-ago period. Production was approximately 3.9 million barrels per day, an increase of 15% from 3.4 million barrels per day in the same period last year.
