Oil and gas giants in the United States and Europe have disclosed weaker first-quarter results, attributing the downturn to a significant decline in natural gas prices compared to the same period last year.
This dip in performance marks a retreat from the record-breaking levels witnessed in 2022, fueled by heightened demand following the COVID-19 pandemic and subsequent price surges triggered by Russia’s invasion of Ukraine.
In the U.S. market, Exxon Mobil (NYSE:XOM) fell short of Wall Street’s earnings expectations, citing underperformance in fuel derivatives. Conversely, Chevron (NYSE:CVX) exceeded subdued forecasts, buoyed by better-than-anticipated U.S. oil production figures.
Across the Atlantic, French energy titan TotalEnergies (EPA:TTEF) slightly surpassed analysts’ predictions, with robust refining margins partially offsetting a notable decline in natural gas profits.
TotalEnergies Chief Financial Officer Jean-Pierre Sbraire attributed the downturn in European gas prices, down by 35%, to a mild winter and elevated storage levels.
Year-on-year, Exxon’s profit declined by 28%, Chevron’s decreased by 16%, and TotalEnergies reported a 22% decrease, with both U.S. majors also grappling with reduced profits from gasoline and fuels.
Henry Hub futures, the U.S. gas benchmark, have been trading below $1.70 per million British thermal unit (mmBtu), hitting a 3-1/2-year low earlier this year due to warm weather conditions and oversupply.
While global benchmark Brent crude prices remained relatively stable compared to last year at $81.76 a barrel, the current surge to around $90 per barrel indicates a potential decline in lucrative oil refining margins going forward. TotalEnergies anticipates a less profitable refining business in the second quarter and beyond, citing geopolitical tensions and OPEC+ production limits as contributing factors.
The previous year’s robust profits prompted bidding activities among industry players such as Exxon, Chevron, and Occidental Petroleum (NYSE:OXY) in a bid to boost oil and gas production.
Exxon reported a $8.5 billion profit, its second-highest first-quarter figure in over a decade, while Chevron earned $5.5 billion and TotalEnergies delivered $5.1 billion in adjusted net income.
Share prices reflected the profit downturn, with Exxon witnessing a 2.6% decline and Chevron experiencing a marginal drop of less than 1% in late New York trading. Conversely, TotalEnergies’ shares closed up 2.09% in Paris following the announcement of a $2 billion share buyback.
However, executives refrained from providing new guidance on production outlooks for upcoming quarters during conference calls, leaving investors with fewer reasons for optimism.
The future outlook for the two largest U.S. oil companies hinges, in part, on pending approvals for two acquisition deals. Exxon anticipates completing its acquisition of Pioneer Natural Resources (NYSE:PXD) in the current quarter, while Chevron’s offer for Hess (NYSE:HES) progresses towards a shareholder vote in late May, with an arbitration process with Exxon expected to conclude in the fourth quarter.
