It's earnings season for the supermajors, and most of them have reported annual declines, missing analyst expectations. Despite this, however, Big Oil appears upbeat about its core business and is making expansion plans.
Exxon, which made headlines earlier this month when it announced the planned acquisition of Pioneer Natural Resources, booked earnings of $9.1 billion, which was higher than in the second quarter but significantly lower than a year ago as oil prices declined.
The company boasted strong operating performance, including record third-quarter refining throughput, as well as a higher crude price than in the second quarter and industry refining margins. On the flip side, Exxon booked lower profits from its chemical business.
More than any of that, however, Exxon made its plans to grow its oil and gas business crystal clear with the acquisition of Pioneer, although the news sparked speculation that the surge in dealmaking activity in the oil patch is a question of survival as the world moves on from oil to alternatives.
Chevron does not seem to buy that. The company followed its bigger rival Exxon in dropping a media bomb when it said, a few days after Exxon, that it would acquire none other than Exxon's partner in Guyana's Stabroek Block, Hess Corp. The deal would give Chevron access to one of the hottest oil spots in the world, with production seen reaching 1.2 million barrels daily in 2028. Related: U.S. Gasoline Refining Profits Tumble As Demand Weakens
The acquisition comes amid weaker-than-expected third-quarter results as Chevron had worse luck than its peers, suffering the financial effects of extended maintenance in both its upstream and downstream business, a delay in the Tengiz project in the Caspian Sea, and lower refining margins from its international operations, per the company itself. But the major also reported record oil-equivalent production during the quarter.
Investors have punished the company for its acquisition plans and its third-quarter performance, but this is unlikely to spur Chevron in the opposite direction: even the European supermajors are scaling back low-carbon operations and doubling down on oil and gas.
BP, which reported third-quarter results earlier this week, missed expectations with its results getting dragged down by weaker gas trade and, notably, a half-a billion-dollar charge on its offshore wind business-yet another ripple from the massive cost overrun problems that the wind power industry has been having recently. Also, it booked higher oil trade results despite weaker gas trade, and higher production in both oil and gas.
Italy's Eni, meanwhile, reported third-quarter results that actually beat analyst expectations, attributing the strong results to the strong performance of its upstream business. The company booked a 4% increase in its oil and gas production and signaled it will be focusing especially on gas and LNG in the future.
Fellow supermajor TotalEnergies also reported third-quarter results that were above analyst expectations, attributing these to higher oil prices during the period and stronger refining margins. It also reported encouraging exploration results from projects in Namibia and Suriname-at a time when there is a massive campaign to discourage all new oil and gas exploration, including from the EU.
Shell is reporting third-quarter on Thursday, but it said earlier this month that its gas trading operations had rebounded in the period after a decline in the second quarter of the year. Also this month, the company said it would cut the number of people employed in its low-carbon business by 15% as it shifts its focus to more profitable projects, including in oil and gas.
Big Oil, it seems, is doubling down on its core business, unpopular as this business has become over the past decade as climate activism gathered momentum. The doubling down-and a curb on low-carbon energy exposure for BP and Shell, which were particularly enthusiastic about it a couple of years ago-reflects the realities of energy security and the capacity of hydrocarbons to ensure that security despite the strong, all-out support for alternative energy sources coming from governments and international bodies.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
It believes in the realities of the market rather than the illusory notions of imminent global energy transition, net-zero emissions and a peak oil demand by 2030.
Big Oil’s doubling down on its core business reflects the realities of energy security and the capacity of hydrocarbons to ensure that security despite the strong, all-out support for alternative energy sources coming from governments and international bodies.
Energy security, affordability and sustainability will always take precedence over illusory climate change goals.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert