Rising crude prices and demand for chemicals used in plastics more than offset losses at refining, as North America’s largest oil explorers reported first-quarter results on Friday.
Exxon Mobil Corp. and Chevron Corp. have generated the most free cash flow in over a year, as economies around the world push their way out of lockdowns, boosting demand for energy.
Rising crude prices and demand for chemicals used in plastics more than offset losses from oil refining, with leading North American explorers releasing first quarter results on Friday.
Although meeting Wall Street’s profit expectations, Chevron shares fell 2.4% after disappointing investors who anticipated a resumption in share buybacks. Although Exxon’s deep refining losses were offset by chemicals profits, the stock fell 1.7%.
All supermajors are making money again after the year-to-date 30% crude rally to over $ 65 a barrel, supported by growing demand for energy as economies emerge from the pandemic and that OPEC keeps the line on sharp increases in supply. BP Plc, Royal Dutch Shell Plc and Total SE all preceded their US peers with larger-than-expected earnings.
Exxon’s roughly $ 6 billion free cash flow was more than enough to cover its massive dividend, the first time the oil giant has been able to do so since late 2018. Chevron grossed $ 3.4 billion dollars in first-quarter cash flow, enough to fund its recent dividend hike, which is a closely watched measure for oil supermajors.
For both companies, a major driver of increased cash flow has been sharp spending cuts, with less risky ventures such as shale drilling being favored over more expensive megaprojects. Exxon cut its capital spending by more than half, while Chevron’s was down 43% from a year ago. Neither has planned to increase spending due to rising oil prices, a sign that discipline continues for now.
Exxon gained 64 cents a share in the first quarter, beating analysts’ average estimate of 61 cents in a Bloomberg survey. The oil giant’s exploration and drilling division generated most of the gains, but it also received a substantial tailwind from rising chemicals prices that helped offset losses in the deadly February storm. in Texas.
Exxon’s recovery from last year’s unprecedented string of losses will help restore investor confidence in its ability to maintain and even grow the S&P’s third-largest dividend, the cornerstone of the S&P discourse. CEO Darren Woods on Wall Street. Unlike its European rivals Shell and BP, Exxon didn’t cut payments last year, but the move came at a cost: borrowing rose 44% to nearly $ 68 billion. Exxon reduced its debt by about $ 4 billion this quarter.
Chevron posted adjusted earnings per share of 90 cents, according to a statement, matching the average analyst forecast. Results in the sector indicate that the worst could be over with the twin threat of a global glut and demand-killing Covid-19 lockdowns.
Amid the improving outlook, significant challenges remain. Chevron’s U.S. refining network lost money for the third time in four quarters, while its overseas fuel manufacturing plants slashed crude processing by 16% to meet sluggish demand for transport fuels.
Both companies cited the negative effects of the deadly winter storm that hit Texas in mid-February.
Chevron wants to start repurchasing shares but declined to provide a timeline, reiterating the position announced in March.
“As we look to the future, we plan to start repurchasing shares when we are confident that we can sustain a repurchase program for several years throughout the oil price cycle,” the director said. financier Pierre Breber in remarks prepared for a conference call with analysts later this morning.