Exxon & Chevron Shares Jump After Big Q1 Earnings Beat

The impact of the war in Iran is on full display this morning in the earnings of two oil giants - Chevron and Exxon Mobil - as both smashed earnings expectations (despite production pressures).

Ahead of the results, Exxon and Chevron had both flagged major reductions in 1Q earnings due to “timing effects,” or paper losses on derivatives tied to cargoes that had not yet reached their destinations before the end of the quarter.

These accounting charges are expected to fully unwind and turn a profit over the coming quarters but will contribute to messy numbers this morning. 

Exxon will take a hit of about $3.7 billion while Chevron’s will be about $3.2 billion, the companies guided earlier this month. 

Chevron exceeded profit expectations as higher oil and natural gas prices, as well as supplies from the acquisition of Hess Corp., outweighed production outages from the Iran war. As Bloomberg's Kevin Crowley highlighted: Adjusted first-quarter net income of $1.41 a share was 51 cents higher than the average estimate from analysts in a Bloomberg survey.

Surging prices for crude and gas, combined with growth from Chevron’s new stake in a giant Guyanese field, helped cushion the blow from a 5% sequential drop in overall output.

Chevron already had warned that significant accounting losses on derivatives tied to cargoes that had yet to reach their destinations. Notoriously difficult to model, that guidance prompted some analysts to slash estimates, a factor that may have played into the magnitude of Friday’s beat.

Chevron’s outsized earnings owed much to swelling prices for real-world oil from places such as Kazakhstan, as well as fat margins from processing the company’s own crude through refineries, Chief Financial Officer Eimear Bonner said in an interview.

“Bottom line, execution exceeded expectations,” she said.

Exxon Mobil outperformed expectations after oil-production increases from Guyana and the Permian Basin helped offset supply losses due to the Middle East war. Bloomberg's Kevin Crowley highlighted: Adjusted first-quarter net income of $1.16 a share was 20 cents higher than the average analyst estimate in a Bloomberg survey.

Although profit dropped to a five-year low of $4.9 billion, that figure included the impact of temporary accounting charges tied to derivative contracts that the company expects to fully unwind over the coming months.

Even so, Exxon may revise guidance that forecast full-year daily output equivalent to 4.9 million barrels as the Iran war chokes Middle East energy flows and prevents the Texas oil giant from selling crude and liquefied natural gas from the region.

“Part of the challenge with giving guidance is, as you would imagine, we really don’t know how long the Strait of Hormuz will remain closed,” Chief Financial Officer Neil Hansen said in an interview.

Higher energy prices added $1.7 billion to earnings during the quarter, outweighing a $400 million blow from war-related production outages, according to company figures. Roughly 15% of Exxon’s worldwide output remains offline, Hansen said.

Exxon Mobil shares are up almost 2% in the pre-market...

And Chevron shares are also up around 2%...

Today's results follow big beats by European supermajors...

BP, the first supermajor to report first-quarter results, posted a big beat Tuesday. Earnings more than doubled from a year earlier to $3.2 billion, boosted by its trading and refining businesses.

French supermajor TotalEnergies raised share buybacks and dividends when reporting results Wednesday, on the back of soaring oil and gas prices as well as strong trading performance.

Italian major Eni also boosted share buybacks this quarter thanks to stronger cash-flow expectations.