Exxon Mobil and Chevron reported first-quarter earnings and revenue declines Friday as lower refining margins and natural gas prices took a toll on the energy giants. Meanwhile, the two U.S. supermajors continue to squabble over Chevron's attempt to move into oil-rich Guyana.
Exxon Mobil Q1 EPS came in at $2.06, down 27% compared to Q1 2023, while revenue decreased 4% to $83.08 billion. Analysts predicted earnings of $2.19 per share and sales totaling $79.69 billion.
Meanwhile, Chevron announced first-quarter earnings fell 17% to $2.93 per share with revenue down 4% to $48.72 billion. Wall Street expected EPS of $2.92 and sales of $48.42 billion.
Exxon Mobil stock advanced 1.3% to 119.50 while Chevron stock edged up a fraction to 165.97 during market action Monday. Last week, XOM fell 1.6% and CVX gained 3.7%.
Guyana Bright Spot For Exxon
Exxon and Chevron on Friday said their profit dips in Q1 were primarily due to weaker refining margins and to natural gas prices coming down from last year's highs. Both Exxon Mobil and Chevron saw profit and revenue declines throughout 2023, as oil and natural gas prices weakened vs. prior-year levels — which had been driven higher by Russia's invasion of Ukraine.
Meanwhile, Exxon added Friday that volume growth from Guyana provided a "partial offset" to lower natural gas realizations and lower base volumes. Exxon's quarterly gross production in Guyana came in at 600,000 barrels of oil-equivalent per day.
The company's global production in the first quarter was 3.78 million BOE per day, a decrease of 40,000 BOE per day compared to the fourth quarter and down more than 1% vs. Q1 2023.
Exxon Mobil's Chief Financial Officer Kathryn Mikells said on the earnings call Friday that continued production growth in Guyana and the Permian Basin is key to its upstream business.
Mikells added that so far this year, 44% of Exxon's upstream production volumes are coming from Guyana and the Permian, "which are a key driver of earnings growth."
Exxon added that its $60 billion deal to acquire Pioneer Natural Resources is expected to close the second quarter.
"We delivered a strong quarter with continued growth in advantaged assets, such as Guyana, where production continues at higher-than-expected levels, contributing to historic economic growth for the Guyanese people," Chief Executive Darren Woods said.
Chevron Production Jumps In Q1
Chevron reported Friday that worldwide production increased 12% vs. Q1 2023 to 3.346 million BOE per day. However, production declined more than 1% compared to Q4 2023.
This 12% total increase came as Chevron's U.S. oil-equivalent production jumped 35% due to its acquisition of PDC Energy.
In early February, Exxon Mobil and Chevron forecast nearly flat oil production for 2024 compared to 2023 levels.
Chevron expected production to increase 4%-7% compared to its 3.12 million BOE per day in 2023.
At the same time, Exxon reported plans for a less-than-2% production increase for average net production of about 3.8 million BOE per day in 2024, vs. 3.74 million barrels of oil equivalent per day in 2023.
Exxon Mobil Vs. Chevron: Guyana
Toward the end of 2023 Chevron agreed to acquire Hess for $53 billion, giving the supermajor a share of the Exxon-led project offshore from Guyana.
The energy industry touts offshore Guyana, a resource pioneered by Exxon, as the largest oil discovery in the last 10 years.
Exxon Mobil holds a 45% stake in Guyana's Stabroek block, the largest area under development. China's CNOOC International holds a 25% interest in the project with Hess holding a 30% stake. The Exxon-led venture has been drilling 18,000-foot-deep wells, with drillships working in water as deep as 8,900 feet.
Exxon Mobil's affiliate Esso Exploration & Production Guyana Limited is the consortium operator. The area off Guyana's coast reports estimated recoverable resources of more than 11 billion barrels of oil equivalent.
Guyana is expected to produce more than 1 million barrels per day (bpd) by 2026, according to industry projections.
Currently, Hess' share of net production is about 110,000 bpd. Exxon Mobil is producing around 400,000 bpd in Guyana. Exxon expects output of 1.2 million bpd by the end of 2027.
For comparison, the Energy Information Administration estimates the Permian Basin in west Texas and New Mexico will produce more than 6 million barrels of oil per day in April. It is estimated to hold 50 billion recoverable barrels in the Wolfcamp and Bone Spring formations alone.
Exxon Mobil: Right Of First Refusal
However, Guyana has become a zone of contention, with Exxon claiming it has the right to first refusal to acquire Hess' stake in the Stabroek block.
Exxon Mobil and CNOOC on March 26 merged arbitration claims against Chevron's Hess acquisition. Meanwhile, Hess said in a regulatory filing that Chevron's acquisition could be delayed until October 2025 due to the arbitration case.
Woods said on the first-quarter earnings call Friday that the arbitration case is one way Exxon is looking to "ensure that the value we've created is not diminished through third-party actions.
"We filed for arbitration to confirm our rights and establish the value that the Chevron-Hess transaction places on the Guyana asset," Woods said Friday. "This will allow us to evaluate options to maximize the value for our shareholders. Any responsible management team would do the same."
Chevron Update On Hess Merger Timeline
Meanwhile, Chevron and Hess believe the right of first refusal in the Stabroek joint agreement does not apply to the deal due to the structure of the merger.
Chevron Chief Executive Mike Wirth reiterated this view on the Q1 earnings call, adding he is "confident this will be affirmed in arbitration." However, Wirth added that the timeline for the Hess merger is currently up in the air.
Hess has asked the arbitration tribunal to hear the case in Q3 with a decision in the fourth quarter. Wirth said Friday that timeline would allow the deal to close "shortly thereafter."
"We see no legitimate reason to delay that timeline. It's consistent with what Exxon has outlined is what they would expect, but can't say that's exactly how it unfolds because we haven't seen specific scheduling from the tribunal yet," Wirth said.
The Chevron chief added they are "making good progress" on regulatory approval from the Federal Trade Commission (FTC). Chevron expects to be "substantially complete" with the FTC by mid-2024.
Hess Earnings Surprise Wall Street
Meanwhile, on Thursday Hess reported better-than-expected earnings and revenue, with EPS surging 180% to $3.16 and sales increasing 38% to $3.34 billion.
Hess credited its profit growth on higher production volumes in Q1. The company's oil and gas net production jumped to 476,000 barrels of oil equivalent per day, up by 27% from 374,000 in Q1 2023.
Hess production in the Bakken increased by 17% to 190,000 boe per day, while production in Guyana ballooned 70% to 190,000 boe daily, up from 112,000 boe in Q1 last year.
XOM And Chevron: Stock Performance And Oil Prices
XOM shares have been grinding against resistance around 120, capping the stock's gains since February last year. In 2024, Exxon Mobil stock has rebounded more than 20% from lows.
Chevron has gained around 10% this year. Chevron stock hit its record high of 189.68 in November 2022. Rather than repeatedly rising to retest that level, like Exxon has, Chevron has posted a series of declining highs. The stock traded 13% below its 2022 record as of Thursday.
Meanwhile, geopolitical risk in the Middle East, uncertain signals of demand growth in China and rising U.S. stockpiles have had a push-pull effect on oil prices in recent weeks. U.S. prices have settled back around $83 per barrel as concerns eased over direct confrontation between Israel and Iran. Futures for Brent crude, the international benchmark, traded below $89 per barrel Monday.
Switzerland-based UBS expects fossil fuels, including crude oil, will be an important part of the globe's energy mix for years to come. The bank recently wrote that oil demand will likely rise into the 2030s even as the overall market share will "increasingly give way" to renewables.
Exxon Mobil stock has a 53 Composite Rating out of a best-possible 99. XOM also has a 71 Relative Strength Rating and a 16 EPS Rating.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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