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The surge in oil and gas prices will translate into record-high 2022 earnings for the two U.S. supermajors, Exxon and Chevron, with their combined yearly profits hitting nearly $100 billion, analysts say.
The two oil and gas giants benefited from the soaring price of oil and gas following the Russian invasion of Ukraine. Although oil prices traded below $90 per barrel in the last weeks of 2022 and prices increased on an annual basis by only around 10% last year compared to 2021, extreme volatility and the frequent surges above $100 per barrel helped all oil firms, including the biggest American integrated companies, generate record or near-record quarterly profits and cash flows.
The yearly earnings for Exxon and Chevron are also expected to be at record highs. Exxon is set to report a record of as much as $56 billion in profit for 2022, while Chevron’s earnings are projected to exceed $37 billion, also a record-high, per estimates compiled by S&P Capital IQ cited by the Financial Times.
The supermajors’ record quarterly earnings have drawn repeated criticism from President Joe Biden and officials from his Administration, who have slammed company strategies to boost share buybacks and raise dividends instead of “passing on the savings” to “lower the prices at the pump” for American consumers.
Exxon and Chevron’s quarterly earnings after the Russian invasion of Ukraine were already an indication that the yearly profits for 2022 would be at record highs.
Chevron posted its highest-ever quarterly profits for the second quarter, thanks to high oil and gas prices and tight fuel markets driving multi-year high refining margins. For Q3, Chevron recorded its second-highest quarterly profit ever on the back of increased oil and gas demand and increased U.S. production. Exxon booked a record $19.66 billion profit for the third quarter, beating the previous record of $17.9 billion it booked for the previous quarter.
Chevron is “on track to beat” in 2022 its free cash flow record from 2021, chief financial officer Pierre Breber said on the Q3 earnings call in October.
Chevron said last month its 2023 organic capex would be $14 billion for 2023, consistent with its “long-term plans to safely deliver higher returns and lower carbon,” according to chairman and CEO Mike Wirth.
“Our capex budgets remain in line with prior guidance despite inflation,” Wirth said. “We’re winning back investors with capital efficient growth, a strong balance sheet, and more cash returned to shareholders.”
Exxon’s corporate plan through 2027, also unveiled in December, maintains annual capital expenditures at $20-$25 billion, while growing lower-emissions investments to around $17 billion. Investments in 2023 are expected to be in the range of $23 billion to $25 billion to help increase supply to meet global demand.
“We view our success as an ‘and’ equation, one in which we can produce the energy and products society needs – and – be a leader in reducing greenhouse gas emissions from our own operations and also those from other companies,” said chairman and CEO Darren Woods.
Even if they raise investments in clean energy solutions, both supermajors say that they would continue to deliver oil and gas as the world will still run on fossil fuels for years, and decades, to come.
The strategy, however, has been slammed by both environmentalists and the White House. Campaigners accuse oil majors of greenwashing, while the Biden Administration is accusing the companies of “war profiteering” and of not investing in American supply, threatening windfall taxes for those who don’t.
If oil firms don’t invest in increasing production and refining capacity, “they’re going to pay a higher tax on their excess profits and face other restrictions,” President Biden said in October.
With the decline in U.S. gasoline prices in recent weeks, the rhetoric of blaming the oil industry has subsided at the expense of the Administration taking credit for the falling prices at the pump.
On several occasions, the American Petroleum Institute (API) has issued statements after criticism from the Biden Administration. In one of the most recent from end-October, API President and CEO Mike Sommers said, “Rather than taking credit for price declines and shifting blame for price increases, the Biden administration should get serious about addressing the supply and demand imbalance that has caused higher gas prices and created long-term energy challenges.”
“Oil companies do not set prices—global commodities markets do. Increasing taxes on American energy discourages investment in new production, which is the exact opposite of what is needed.”
