NEW YORK, July 31 — US oil giants ExxonMobil and Chevron reported strong profits yesterday riding a wave of higher prices amid recovering demand, but pledged to keep a lid on spending.
The results marked a 180-degree reversal from this time last year when the companies suffered hefty losses amid heavy pandemic restrictions that crimped economic activity and halted travel.
“Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our product,” said Exxon Chief Executive Darren Woods.
But neither company indicated plans to pivot away from the focus on spending discipline or open the spigots on more investment in additional projects, reflecting pressure from investors, including those who oppose more spending on fossil fuels.
ExxonMobil said it would keep its 2021 capital spending budget at the low end of projections, while Chevron highlighted its lower spending in the second quarter.
Chevron also announced plans to resume share repurchases in the third quarter.
Growing ESG influence
ExxonMobil reported profits of US$4.7 billion (RM19.8 billion) in the second quarter, compared with a loss of US$1.1 billion in the same three months of last year when pandemic restrictions devastated energy demand.
Revenues more than doubled to US$67.7 billion.
ExxonMobil scored higher profits across its exploration and production business, with significantly higher oil prices more than offsetting lower production. Chemical profits also surged during the quarter on strong demand and pricing.
But the company pointed to “ongoing impacts from market oversupply” as a drag on its downstream business, which lost money during the quarter.
ExxonMobil said it expects higher planned spending in the second half of the year on key projects, but full-year spending will be on the “lower end” of its projected US$16 billion to US$19 billion for all of 2021.
Chevron, meanwhile, brought in earnings of US$3.1 billion, compared with a loss of US$8.3 billion a year earlier, as revenues more than doubled to US$37.6 billion.
“Second quarter earnings were strong, reflecting improved market conditions, combined with transformation benefits and merger synergies,” said Mike Wirth, Chevron’s chief executive.
“Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending,” Wirth added.
“We will resume share repurchases in the third quarter at an expected rate of US$2-3 billion per year.”
CFRA Research analyst Stewart Glickman said both oil giants had a “great” quarter, adding that “everything that had been a headwind turned around and became a tailwind.”
Investors do not want the oil giants to boost capital spending, he said.
“The investor base is telling Exxon to keep the cap ex low, improve the capital efficiency,” Glickman said. “The growth mantra (oil and gas production) has totally lost resonance.”
That includes investors focused on environmental, social and governance issues or ESG.
“ESG investors are becoming a bigger force,” Glickman said. “They really want to see more focus on renewable energy, not on fossil fuel.”
At quarterly meetings earlier this spring, ExxonMobil and Chevron each suffered defeats in votes on shareholder proposals from investors who favour more focus on the energy transition.
At ExxonMobil, three directors who favoured a more aggressive response to climate change were elected despite extensive company campaigning against them.
ExxonMobil shares fell 2.3 per cent to US$57.57 per cent, while Chevron dropped 0.7 per cent to US$101.81. — AFP
Source: Malay Mail
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