Exxon, Chevron surprise Wall Street as Permian lifts results

Bloomberg

Exxon Mobil Corp. and Chevron Corp. delivered their strongest third-quarter results in four years, capping a week in which Big Oil enjoyed profits not seen since the days of $100 crude. Both companies reported double-digit production increases in the Permian Basin, the shale region in Texas and New Mexico that’s propelling total US oil output to an all-time high. The Permian now makes up 11 percent of Chevron’s overall output and is home to Exxon’s fastest-growing large project.
The two American supermajors have historically focussed on multibillion engineering marvels that take years, and in some cases even decades, to build. Exxon and Chevron changed strategy after oil prices plunged in 2014 and 2015, shifting billions of dollars of investment into shale deposits where wells can be drilled in a matter of weeks.
Exxon’s oil and natural gas output surpassed expectations for the first time in 10 quarters, rebounding from the decade-low reached in the second quarter. It said that earnings climbed to $6.2 billion, up 57 percent from a year earlier. At Chevron, record production combined with higher crude prices to double its profit to $4 billion.
After many disappointing quarters, Wall Street was pleased with Exxon. “Overall excellent cash generation,” Paul Sankey, an analyst at Mizuho Securities USA LLC, said in a note to clients. “We think the company is on the right course under new CEO Darren Woods, but it is a long turning circle.” The results show that American and European energy majors are in a sweet spot, benefiting from four hard years of belt-tightening, shale investments and now higher oil and gas prices. Royal Dutch Shell Plc posted the biggest cash haul in a decade earlier this week, obliterating analyst’s estimates.
They are, however, taking different approaches to returning profits to investors. Shell increased its stock buyback by 25 percent to $2.5 billion over the next three months while BP decided to pay for its $10.5 billion purchase of BHP Billiton Ltd.’s US onsh- ore assets in cash rather than dilute shareholders through a rights issue.
Exxon meanwhile, has no plans for buybacks, focusing instead on steadily raising its dividend and investing in a raft of mega-projects from Guyana to Mozambique. Chevron Chief Financial Officer Pat Yarrington said the company would consider raising its buyback from its current level of $3 billion, which is deemed too conservative by some analysts, if oil prices stayed at
current levels.