WASHINGTON – ExxonMobil and Chevron, the largest US energy companies, on Feb 2 reported sizeable profits for the final quarter of 2023, showing that the oil and gas industry remained robust at a time of doubt because of climate change concerns.
The companies’ earnings were down from the bonanza year of 2022, when a surge in prices pushed up profits, but were otherwise the strongest in recent history.
Exxon earned US$7.6 billion (S$10.2 billion) in the fourth quarter of 2023, a 40 per cent fall from a year earlier. For all of 2023, the company reported US$36 billion in earnings, compared with US$55.7 billion in 2022. Before that, the last time Exxon made more than US$30 billion in a year was in 2014.
Chevron reported earnings of US$2.3 billion in the fourth quarter, down from US$6.3 billion a year earlier. The change was because of lower commodity prices and write-downs, especially in the company’s home state of California. For the year, the company made US$21.4 billion, down from US$35.4 billion in 2022 but, like Exxon, otherwise its biggest annual profit in a decade.
The companies generated enough cash to fund big dividends and share buybacks. Such payouts are what investors now look for in the industry, analysts say.
“In 2023, we returned more cash to shareholders and produced more oil and natural gas than any year in the company’s history,” Chevron chief executive Mike Wirth said in a statement. The company said it bought back 5 per cent of its outstanding shares during the year.
Exxon paid out US$14.9 billion in dividends and made US$17.4 billion in buybacks in 2023. Mr Darren Woods, Exxon’s chair and CEO, said this topped the payouts at other Western energy giants.
“I have a great sense of pride in what our people accomplished,” he said in a statement.
In the fourth quarter, the price of a barrel of Brent crude oil, the international benchmark, was 5 per cent lower than it was a year earlier, while natural gas in Europe was down more than 60 per cent in the key European market and 50 per cent lower in Japan and South Korea.
Still, the major energy companies’ latest earnings showed that they remained enormously profitable and had been taking steps to enhance the performance of their core businesses.
Exxon, Chevron and other oil companies are making some investments in lower-carbon businesses, but the cash that funds shareholder payouts comes from the production and sale of oil and gas. Exxon said that over the year, output from two key areas, the Permian Basin in the southwestern United States and Guyana in South America, rose 18 per cent.
Both Exxon and Chevron recently made acquisitions that are likely to add to their oil and gas production. Exxon agreed to acquire Pioneer Natural Resources, a leading shale driller, for nearly US$60 billion in October, while Chevron reached a deal to take over Hess for US$53 billion.
The low-carbon moves that these companies make are usually closely related to their existing businesses. Mr Woods said on a call with analysts on Feb 2 that Exxon was scoping out US$20 billion in investments aimed at reducing emissions. In 2023, the company paid US$4.9 billion for Denbury, a company that owns pipelines for transporting carbon dioxide.
The idea, Mr Wood said, was to sign up high-emitting factories and other installations along the Gulf of Mexico to take away their greenhouse gases.
He said it made sense to use such technologies to try to reduce emissions “rather than tear up and throw away the existing infrastructures and the industries that we have in place”.
On Feb 2, two activist investors withdrew a proposal for shareholders to vote on Exxon’s cutting its emissions more quickly. Exxon had sued the investors in federal court to prevent the proposal from going to a vote. One of the investors, Arjuna Capital, called Exxon’s move “intimidation and bullying”.
On Feb 1, Shell, Europe’s largest energy company, reported a 26 per cent decline in adjusted earnings in the fourth quarter, but still made US$7.3 billion. Shell earned US$28 billion for the entire year and paid out US$23 billion to shareholders in dividends and buybacks, the company said.
Mr Wael Sawan, who became CEO of Shell in 2023, said he had cut costs at the company by US$1 billion and aimed to cut at least another US$1 billion. He is also trimming businesses that have become marginal, like onshore oil production in Nigeria.
Whereas his predecessor, Mr Ben van Beurden, liked to tell a story about his daughter confronting him at dinner with her views about Shell’s role in climate change, Mr Sawan is not shy about being in the oil and gas business. He said his company was bringing online fields that would add 500,000 barrels a day of oil equivalent into production by 2025.
“They will enable us to continue providing the energy security that the world needs while delivering cash flow,” he said. NYTIMES
