Oil Giants Exxon, Chevron Increase Spending amid Ukraine Crisis

ExxonMobil and Chevron have reported soaring profits despite lower oil and natural gas volumes as the petroleum giants return billions of dollars to shareholders in the wake of lofty crude prices and refining margins.
Both US oil giants scored huge profit increases propelled by crude prices that rose after the Russian assault on Ukraine. But both companies have thus far avoided additional capital spending increases to fund drilling and development in spite of a tightening global energy outlook.
“We continue to invest prudently,” said Kathy Mikells, chief financial officer of ExxonMobil, which increased spending on share buybacks by $20 billion.
“We’re going to stay disciplined on capital. We’ve given you a range, we’ve stuck within the that range ever since we started putting it out there,” said Mike Wirth, chief executive of Chevron, which raised its plans for share buybacks to $10 billion per year after previously targeting $5 to $10 billion per year.
Both oil giants are implementing planned 2022 capital spending increases, but ruled out additional investment.
Russia hit
After a dreadful 2020 amid Covid-19 lockdowns that devastated petroleum demand, oil companies returned to profitability in 2021 and have continued to see earnings soar this year.
ExxonMobil’s first-quarter profits more than doubled to $5.5 billion, as a strong market for energy commodities more than offset $3.4 billion in one-time costs connected to its withdrawal from the vast Sakhalin offshore oil field following Russia’s offensive on Ukraine.
Revenues rose 52.4 percent to $87.7 billion.
At Chevron, profits came in at $6.3 billion, more than four times the year-ago level on a 70 percent rise in revenues to $54.4 billion.
Friday’s eye-popping profits could add to cries of oil industry “profiteering” from congressional Democrats, who plan legislation in the wake of painful gasoline price hikes. Petroleum industry officials have dismissed the effort as “political posturing.”
Oil prices have generally lingered above $100 a barrel after spiking to around $130 a barrel in early March shortly after the Russian attacks on Ukraine.
Natural gas prices have also been elevated amid worries over the reliability of Russian supplies to Europe, while refining profit margins are “above the 10-year range, with the tight supply/demand balance expected to persist,” as ExxonMobil put it.
Wirth said there are few signs of immediate relief in the tight oil market, given rising demand as more economies ease Covid-19 restrictions, moves by some oil majors to cut petroleum investment in favor of low-carbon energy and other factors.
“Inventories are quite low, demand is still strong and economies at this point seem to be handling it,” Wirth said on a conference call with analysts. “At some point, particularly if prices were to move higher, I do think it starts to be a bigger drag on the economy.”
But the oil market remains cyclical and “the supply response is coming,” he said.

About Parvin Faghfouri Azar

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