Ramping up production is paying off for some of the world’s biggest oil and gas companies.
Exxon Mobil, Shell, BP and ConocoPhillips topped analysts’ expectations for second-quarter earnings last week, while Chevron’s profit disappointed in part because of its refining business.
Most of the billions of dollars in company earnings came from oil and gas production, and executives said they would be spending more on new exploration projects in the future. Drew Depoe, a senior analyst at Enverus Intelligence Research, said that doesn’t necessarily mean investors are abandoning climate metrics at major oil companies — but that it does mean they’re keeping a closer eye on profits from production.
“I would frame it as a signal in how these companies view the resilience of global oil demand over the medium term,” Depoe said. “Investors want to put money to work in oil and gas, given the strong returns. But within that space, they still have at least an eye toward emissions profiles.”
Chevron also announced that it will relocate its headquarters to Houston from San Ramon, California. CEO Mike Wirth said during the company’s earnings call Friday that the decision was made “to enable better collaboration and engagement, both internally and externally.” Chevron has publicly complained about some of California’s actions on oil and gas, which industry observers say could be part of the reason for the move.
In a Friday social media post on X, Texas Gov. Greg Abbott (R) welcomed Chevron and said Texas is the company’s “true home.”
Here are some key takeaways from oil companies’ recent earnings calls:
Booming production
Leaders at Exxon and Chevron were clear Friday in their aims for the coming quarters and years: Increase production to keep raking in profits.
Exxon said oil and gas production in its upstream business grew by 15 percent in the second quarter compared with the first quarter. Much of that was the result of record production in both the Permian Basin and the South American country of Guyana.
Exxon’s total oil and liquids production levels reached nearly 3 million barrels a day in the second quarter.
Those gains helped boost Exxon’s second-quarter profits to $9.2 billion, up from $7.9 billion in the year-earlier period. CEO Darren Woods said the Texas-based company will continue to chase more barrels and that global demand for fossil fuels remains high.
Exxon’s $60 billion acquisition of Pioneer Natural Resources, which closed earlier this year, also helped boost the company’s revenue in the second quarter.
“Oil demand continues to be at record levels,” Woods said during Exxon’s earnings call. “Last year was a record. We anticipate this year will be a record, and then next year will be a record,” Woods said.
“It’s just a question of working through the supply that’s coming on, most of that led by what’s happening in the Americas,” he added.
Although reports have differed on when global oil demand may peak, one study suggested recently that the industry may not have sufficient oil reserves to meet future demand if rapid vehicle electrification doesn’t occur.
Also Friday, Woods said that the startup of the Golden Pass liquefied natural gas terminal in Texas would face a delay. Zachry Holdings, which had been the lead contractor for the project, declared bankruptcy earlier this year. An Exxon executive told Bloomberg the company now does not expect the project to start up until late 2025.
Rob Thummel, a senior portfolio manager at Tortoise Capital Advisors, said he expects Exxon’s production to keep growing throughout the year and into next year, pointing to the $28 billion the company plans to spend on capital expenditures this year. He said he expects the company to continue record-setting oil and gas production in coming quarters.
“Global energy demand is setting new records every year, global oil production is at record highs and global gas production is at records highs,” Thummel said. “That means global consumption is at record highs and theoretically should go higher unless there’s some global recession.”
For Chevron, Thummel chalked up part of its less-than-expected earnings to some tax requirements and a handful of other “unusual” financial items.
But Chevron’s net oil equivalent production in the second quarter was also up by 11 percent compared to the year-earlier period. Those numbers would be boosted if or when Chevron’s acquisition of Hess goes through, but that $53 billion deal has faced some legal challenges.
The Federal Trade Commission in July delayed its decision on whether to let the merger go forward until an arbitration case between the two companies and Exxon is settled, according to a report from Bloomberg.
On Friday, Chevron’s Wirth said it appears that an arbitration case between Exxon and Chevron over assets related to offshore Guyana won’t take place until next year, delaying the planned Hess transaction until at least 2025.
“We’re committed to the merger and look forward to combining the two companies,” Wirth said.
Arctic oil is coming
After years of delay, Houston-based ConocoPhillips is ahead of schedule building the $8 billion Willow oil project in the Arctic.
The Houston-based company received an OK last year from the Biden administration despite significant opposition from climate groups. Now, the company has pushed its expected capital expenses to the high end of its previous guidance — $11.5 billion.
ConocoPhillips said it has achieved significant milestones for Willow, including the arrival of operations center modules that were built in other parts of the U.S. and shipped to Alaska, as well as the beginning of fabrication on a central facility earlier than planned.
“Hitting these milestones early is really important and it gives us a lot of confidence,” said Kirk Johnson, senior vice president for global operations at ConocoPhillips, in a call with investors Thursday. “We’re still on track for a 2029 first oil.”
Willow is being built on federal lands in the National Petroleum Reserve in Alaska. The Biden administration, which had committed to reining in oil and gas on public lands, said it was forced to approve a scaled-down version of the oil project because of ConocoPhillips’ long-held leasing rights.
After a federal judge rejected a coalition of environmental groups’ effort to prevent construction from moving forward, the company made a final investment decision on the project and commenced construction late last year. Willow is forecast to produce 180,000 barrels of oil per day at its peak.
ConocoPhillips, which reported second-quarter earnings of $2.3 billion — up from $2.2 billion in the year-earlier period — said it would spend between $1.5 billion and $1.7 billion on Willow this year following a “successful winter construction season.”
The remote nature of Alaska’s North Slope and its challenging winter weather extremes have led the company to do much of the Willow facility construction outside of the Arctic. More work is expected on the North Slope next year.
ConocoPhillips CEO Ryan Lance told investors on last week’s earnings call that Willow is being constructed partly off-site to take advantage of year-round construction in the Gulf of Mexico region. Oil activity in the Arctic is limited to the winter months, when ice and snow cover protects the tundra from damage. But winter storms can challenge activity.
Lance also assured investors that ConocoPhillips is well within its experience in building Willow and that the design for the project mirrors what it has built on the North Slope over the last decade.
“That should give you some comfort. We know what we’re doing. We’ve done this before. And these are just repeats of stuff we’ve done in the past,” he said.
Backing away from renewables
Two of Europe’s largest oil and gas companies saw second-quarter profits beat analysts’ expectations last week as their businesses continue to pivot away from renewables.
On Thursday, Shell posted a second-quarter profit of $6.3 billion, up from $5.1 billion in the year-earlier period. It will repurchase about $3.5 billion in shares during the third quarter, in keeping with its recent plans.
BP, meanwhile, reported earning $2.8 billion in second-quarter earnings, compared with $2.6 billion in the year-ago period.
Environmental groups railed against the profits as both London-based companies have announced cuts to their energy transition businesses and new investments in fossil fuels.
Chiara Liguori, senior climate justice policy adviser for Oxfam Great Britain, a confederation of organizations focused on ending global poverty, took specific aim at Shell in a statement.
“It is shameful that Shell, as one of the world’s largest and most profitable fossil fuel companies, continues to reap billions in profits off the back of its planet-wrecking oil and gas operations,” she said. “At a time when the company should be taking strong action to cut emissions it is instead weakening its climate targets and continues to invest in new oil and gas projects, in favour of short-term shareholder returns.”
In May, more than 78 percent of Shell shareholders voted to approve a resolution that included less strict corporate goals for carbon dioxide emissions than the company had in place the year before.
Those changes showed in earnings. In the second quarter, Shell’s renewables and energy solutions business segment reported a loss of $187 million. Its upstream oil sector earned $2.33 billion during the same period.
Shell CEO Wael Sawan has said that Shell remains committed to achieving net-zero carbon emissions from its own operations by 2050 and that the company is continuing to grow its renewable portfolio where there are attractive returns.
He pointed on Thursday’s earnings call to a recent final investment decision to go ahead with a Canadian carbon capture and storage project called Polaris, which will be tied to its energy and chemicals park in Alberta.
BP has also walked back some of its emissions targets in the past year.
BP’s carbon dioxide emissions in 2023 grew for the first time since 2019, driven largely by a boom in oil production and some temporary operations work. Those calculations include emissions created by the use of its products.
Its renewables and natural gas segment lost $315 million in the second quarter of this year. BP’s oil production and operations unit, meanwhile, hauled in nearly $3.3 billion in profit in the second quarter of 2024.
Last Tuesday, new BP CEO Murray Auchincloss said carbon dioxide emissions from the company’s own operations were down 40 percent in the first and second quarter of this year compared to the first half of 2019. He said the company remains committed to transitioning to an integrated energy company rather than just an integrated oil company.
But environmental groups say BP’s oil and gas profits, and less stringent emissions targets, come at a cost to regions and communities that will never see a share of the company’s profits.
