Oil giants pump for windfall profits

Oil giants pump for windfall profits

Exxon Mobil and Chevron, the largest U.S. energy companies, on Friday reported sizable profits for the final quarter of last year, showing that the oil and gas industry remained strong at a time of doubt due to concerns about climate change.

The companies’ profits were lower than in the boom year of 2022, when a rise in prices boosted profits, but were otherwise the strongest in recent history.

Exxon earned $7.6 billion in the fourth quarter of 2023, a 40 percent drop from a year earlier. For all of 2023, the company reported $36 billion in profits, compared to $55.7 billion in 2022. Before that, the last time Exxon earned more than $30 billion in a year was in 2014.

Chevron reported fourth-quarter earnings of $2.3 billion, up from $6.3 billion a year earlier. The change was due to lower raw material prices and writedowns, especially in the company’s home state of California. For the year, the company earned $21.4 billion, up from $35.4 billion in 2022 but, like Exxon, otherwise its highest annual profit in a decade.

The companies generated enough cash to finance large dividends and share buybacks. These payments are what investors are now looking for in the industry, analysts say.

“In 2023, we returned more cash to shareholders and produced more oil and natural gas than any year in the company’s history,” Chevron CEO Mike Wirth said in a statement. The company said it repurchased 5 percent of its outstanding shares during the year.

Exxon paid $14.9 billion in dividends and made $17.4 billion in buybacks last year. Darren Woods, chairman and chief executive of Exxon, said this exceeded payments to other Western energy giants. “I am very proud of what our people achieved,” he said in a statement.

In the fourth quarter, the price of a barrel of Brent crude oil, the international benchmark, was 5 percent lower than a year earlier, while natural gas fell more than 60 percent in the main European market and 50 percent less in Japan. and South Korea.

Still, the latest earnings from major energy companies showed that they remain hugely profitable and have been taking steps to improve the performance of their core businesses.

Exxon, Chevron and other oil companies are making some investments in low-carbon businesses, but the cash that funds payments to shareholders comes from the production and sale of oil and gas. Exxon said that during the year, production from two key areas, the Permian Basin in the southwestern United States and Guyana in South America, increased 18 percent.

Both Exxon and Chevron recently made acquisitions that will likely increase their oil and gas production. Exxon agreed to acquire Pioneer Natural Resources, a major shale driller, for nearly $60 billion in October, while Chevron reached a deal to take over Hess for $53 billion.

The low-carbon measures these companies take are often closely linked to their existing businesses. Exxon’s Woods said on a call with analysts on Friday that the company was looking at $20 billion in investments aimed at reducing emissions. Last year, the company paid $4.9 billion for Denbury, a company that owns pipelines to transport carbon dioxide.

The idea, Woods said, is to contract factories and other high-emitting facilities along the Gulf of Mexico to eliminate their greenhouse gases. He said it made sense to use those technologies to try to reduce emissions “rather than destroying and scrapping the existing infrastructure and industries that we have.”

On Friday, two activist investors withdrew a proposal for shareholders to vote on cutting Exxon’s emissions more quickly. Exxon had sued investors in federal court to prevent the proposal from coming to a vote. One of the investors, Arjuna Capital, called Exxon’s move “bullying and intimidation.”

On Thursday, Shell, Europe’s largest energy company, reported a 26 percent decline in fourth-quarter adjusted earnings but still earned $7.3 billion. Shell earned $28 billion for the full year and paid $23 billion to shareholders in dividends and buybacks, the company said.

Wael Sawan, who became chief executive of Shell last year, said he had cut costs at the company by $1 billion and intended to cut at least another $1 billion. He is also cutting back on businesses that have become marginal, such as onshore oil production in Nigeria.

While his predecessor, Ben van Beurden, liked to tell a story about how his daughter confronted him over dinner with his views on Shell’s role in climate change, Sawan has no qualms about being in the oil business. and gas. He said his company was bringing into operation fields that would add half a million barrels a day of oil equivalent to production by 2025.

“They will allow us to continue providing the energy security the world needs while generating cash flow,” he said.

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John C. Johnson

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