Last week, Exxon Mobil, Shell, BP, and ConocoPhillips all reported second-quarter earnings that exceeded analysts' expectations, while Chevron’s results fell short, largely due to challenges in its refining business.
A significant portion of these multi-billion dollar earnings came from oil and gas production. The companies' executives have indicated that they plan to increase spending on new exploration projects moving forward. While this doesn't suggest that investors are ignoring climate goals at these major oil firms, it does show that they are focusing more on the profits generated from production.
In a notable development, Chevron announced it will be moving its headquarters from San Ramon, California, to Houston, Texas. CEO Mike Wirth explained during the company’s earnings call on Friday that the relocation is intended to “enable better collaboration and engagement, both internally and externally.” Industry observers speculate that this move could also be influenced by Chevron's dissatisfaction with some of California's regulatory actions on oil and gas.
ExxonMobil and Chevron: Production Growth
Top executives at ExxonMobil and Chevron laid out their clear priorities for the coming months: ramping up production to maximize profits.
ExxonMobil saw its oil and gas production jump by 15% in the second quarter, largely thanks to record-breaking output from the Permian Basin and Guyana. This brought Exxon’s total oil and liquids production to nearly 3 million barrels a day.
This increase in production helped Exxon post a strong second-quarter profit of $9.2 billion, up from $7.9 billion a year earlier. CEO Darren Woods made it clear that the company plans to keep pushing for more, stating, "Oil demand continues to be at record levels. Last year was a record. We anticipate this year will be a record, and then next year will be a record."
Exxon’s recent $60 billion acquisition of Pioneer Natural Resources, completed earlier this year, also played a big role in boosting the company's revenue.
However, not everything is running smoothly. Woods mentioned a delay in the startup of the Golden Pass liquefied natural gas terminal in Texas, now expected to be operational in late 2025. The delay is partly due to the bankruptcy of Zachry Holdings, the lead contractor on the project.
Rob Thummel, a senior portfolio manager at Tortoise Capital Advisors, expects Exxon’s production to keep growing this year and into next, pointing out the company’s $28 billion plan for capital expenditures. "Global energy demand is setting new records every year, and so is production," Thummel noted. "Unless there's a global recession, we should expect consumption to keep climbing."
Chevron, too, reported an 11% increase in net oil equivalent production in the second quarter compared to last year. But despite these gains, the company’s earnings fell short of expectations due to some unexpected tax and financial issues.
Chevron’s planned $53 billion acquisition of Hess could further boost its production numbers, but the deal has hit some legal roadblocks. The Federal Trade Commission recently delayed its decision on the merger until an arbitration case between Chevron, Hess, and Exxon over assets in offshore Guyana is settled. CEO Mike Wirth indicated that this process likely won’t wrap up until next year, pushing the completion of the Hess acquisition to at least 2025. Still, Wirth remained optimistic, saying, "We’re committed to the merger and look forward to combining the two companies."
Shell and BP: Renewables Segment Loss
Two of Europe's largest oil and gas giants, Shell and BP, recently reported second-quarter profits that exceeded analysts' expectations, marking a continued shift away from their renewable energy.
Shell announced a second-quarter profit of $6.3 billion, up from $5.1 billion in the same period last year. The company also revealed plans to repurchase approximately $3.5 billion in shares during the third quarter. BP followed suit, reporting second-quarter earnings of $2.8 billion, an increase from $2.6 billion a year ago.
As both companies shift their focus back toward fossil fuels, environmental groups have criticized the move, arguing that it undermines global efforts to combat climate change. Chiara Liguori, senior climate justice policy adviser for Oxfam Great Britain, expressed strong disapproval, stating, "It is shameful that Shell, as one of the world’s largest and most profitable fossil fuel companies, continues to reap billions in profits off the back of its planet-wrecking oil and gas operations."
5 Key Facts:
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Shell’s Renewables Segment Loss: In the second quarter, Shell’s renewables and energy solutions business reported a loss of $187 million, while its upstream oil sector earned $2.33 billion.
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Shareholder Vote: In May, over 78% of Shell shareholders approved a resolution with less stringent corporate goals for carbon dioxide emissions, reflecting a shift in the company’s climate strategy.
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BP’s Emissions Increase: BP’s carbon dioxide emissions grew in 2023 for the first time since 2019, largely due to increased oil production and temporary operational activities.
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BP’s Renewables Loss: BP’s renewables and natural gas segment recorded a loss of $315 million in the second quarter of 2023, contrasting with the $3.3 billion profit from its oil production and operations unit.
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Carbon Capture Investment: Despite the shift away from renewables, Shell CEO Wael Sawan highlighted a recent decision to proceed with the Polaris carbon capture and storage project in Canada, indicating some continued investment in lower-carbon technologies.
Shell’s CEO, Wael Sawan, has maintained that the company is still committed to achieving net-zero carbon emissions from its operations by 2050. He pointed to the final investment decision on the Polaris carbon capture and storage project in Canada as an example of Shell’s ongoing efforts to expand its renewable portfolio, albeit selectively, where it sees attractive returns.
Similarly, BP has scaled back some of its emissions targets over the past year. Notably, BP’s carbon dioxide emissions in 2023 grew for the first time since 2019, driven by a surge in oil production and other operational activities. Despite this, BP's new CEO, Murray Auchincloss, emphasized on a recent earnings call that the company had reduced emissions from its operations by 40% in the first half of 2023 compared to the same period in 2019.
ConocoPhillips: Oil from the Arctic
ConocoPhillips, the Houston-based energy giant, is making rapid progress on its ambitious $8 billion Willow oil project in the Arctic, after years of delays. Despite strong opposition from environmental groups, the Biden administration approved a scaled-down version of the project last year, citing the company’s long-standing leasing rights in the National Petroleum Reserve in Alaska.
With the green light, ConocoPhillips has pushed its capital expenditure estimates to the upper end of its previous guidance, now expecting to spend $11.5 billion on the project. The company has already hit several key milestones, including the early arrival of operations center modules and the start of fabrication on a central facility ahead of schedule.
"Hitting these milestones early is important and it gives us a lot of confidence," said Kirk Johnson, ConocoPhillips' senior vice president for global operations, during a call with investors. The company remains on track to deliver "first oil" by 2029.
Willow, built on federal lands in Alaska, is expected to produce 180,000 barrels of oil per day at its peak. The project’s remote location on the North Slope presents unique challenges, especially with the harsh winter conditions that restrict much of the on-site work to the colder months when the tundra is protected by snow and ice. ConocoPhillips has opted to construct significant portions of the facility off-site, taking advantage of year-round construction capabilities in the Gulf of Mexico region.
"We’re well within our experience," ConocoPhillips CEO Ryan Lance noted, adding that the strategy of building parts of Willow off-site is aimed at mitigating the risks associated with Arctic weather.
ConocoPhillips reported Q2 2024 earnings of $2.3 billion, a slight increase from $2.2 billion the previous year. The company has allocated between $1.5 billion and $1.7 billion for Willow this year, following what they described as a "successful winter construction season." As the project moves forward, more construction activity is expected to shift to the North Slope, particularly in the coming year.
The approval of the Willow project by the Biden administration was a contentious decision, balancing the administration’s climate commitments with the realities of existing leases and the strategic importance of domestic oil production. After a federal judge dismissed a lawsuit by environmental groups aimed at stopping the project, ConocoPhillips proceeded with its final investment decision late last year, setting the stage for one of the most significant oil developments in the Arctic in recent years.
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