Exxon, Chevron profits surge

ExxonMobil and Chevron easily swept aside analyst estimates as the battered giants of the U.S. oil industry shook off 2 years of low oil prices and reported surging profits in the first quarter.

Exxon, the world’s biggest oil producer by market value, earned 95 cents a share, outperforming all but one of the 19 analysts’ estimates in a Bloomberg survey. Chevron, the second-largest U.S. driller, swung to a profit in a big way, scoring its largest quarterly gain since 2014 and a per-share result that was 64 percent higher than the average estimate.

As charter members of the elite supermajor clique that also includes Royal Dutch Shell, BP and Total, Exxon and Chevron are among the biggest beneficiaries of the 55 percent escalation in crude prices from the same period in 2016. Total reported a 56 percent profit increase on April 26 and if the trend holds, Shell and BP will post impressive results next week.

“It’s cutting costs, it’s getting more for every dollar you spend, it’s getting more from each well and getting it out faster,” said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis. “It just shows how these companies have had to adapt to a new environment.”

Exxon rose 1 percent to $82.05 at 10:34 a.m. in New York, while Chevron also was up 1 percent to $106.53.

Exxon’s profit surged even as oil and natural gas production fell 4 percent from the same period last year, according to a statement from the Irving, Texas-based company Friday. Exxon cut capital and exploration expenditures in the quarter 19 percent to $4.2 billion.

“In both cases, the earnings beat was largely from realized pricing rather than production,” said Pavel Molchanov, an analyst at Raymond James Financial in Houston. “Pricing is always a proverbial black box for multinational oil and gas producers, and it is not something that companies can themselves control.”

While benchmark Brent crude rose more than 50 percent last year to more than $50 a barrel, prices are down about 9 percent in 2017 as a resurgence in U.S. shale production threatens an attempt by the Organization of Petroleum Exporting Countries and its allies to eliminate a global oversupply.

In his debut quarter, Exxon Chief Executive Officer Darren Woods is focusing on prospects in places as diverse as offshore Guyana and the New Mexico desert to replenish reserves that last year underwent the deepest cut in Exxon’s modern history. Woods’ predecessor, Rex Tillerson, retired in January to become secretary of state. Two weeks later, the company announced the $5.6 billion purchase of acreage in New Mexico.

The company’s board expects to make a final investment decision on the 1.4-billion barrel Liza discovery off Guyana’s coast around the middle of this year, said Vice President Jeff Woodbury.

Profit from Exxon’s overseas production climbed $1.51 billion, offsetting a loss from U.S. wells. U.S. crude output climbed 2.6 percent during the quarter as oil production dropped in every other region of the world. Exxon’s cash balance was up 32 percent during the quarter to $4.9 billion.

First-quarter net income rose to $4.01 billion, or 95 cents a share, from $1.81 billion, or 43 cents, a year earlier, according to the statement. Exxon had been expected to post per-share profit of 86 cents, based on the average of 20 analysts’ estimates compiled by Bloomberg.

Chevron curbed operating expenses by 14 percent and drove drilling outlays down 30 percent during the January-to-March period, the San Ramon, Californiabased company said in a statement on Friday. The company reiterated plans to lift full-year output by 4 percent to 9 percent, excluding the impact of asset sales.

For Chevron, 2016 was a painful year. The company posted its first annual loss in at least 36 years and failed to replace all the crude and natural gas it pumped with new discoveries. As a result, Chief Executive Officer John Watson vowed to cut spending by 15 percent this year to cope with the lingering cash flow impacts of the worst oil market crash in a generation.

Watson has also said he’s devoting 75 percent of the 2017 drilling budget to U.S. shale fields and other projects that will generate cash within two years. That’s a titanic shift for an operator renowned for its proficiency in constructing massive, intricate crude and gas projects that produce for decades.

On Friday, the company swung to a profit of $2.68 billion, or $1.41 a share, in the first quarter, compared with a loss of $725 million, or 39 cents, a year earlier, according to the statement.