Chevron And Exxon Mobil Q3 Profit Expected To Fall 20% As Oil Prices Languish

Chevron (CVX) and Exxon Mobil (XOM) report third-quarter results early Friday. Analysts project a profit drop for both U.S. supermajors as oil prices hold near their lows for the year and natural gas futures are effectively flat.

Ahead of Friday, analyst consensus estimate is for Exxon Mobil’s Q3 EPS of $1.88, down 17% vs. Q3 2023, and revenue increasing 3% to $93.98 billion. Expectations put Chevron earnings down 20% to $2.43 per share with sales coming in at $48.86 billion, decreasing 10% compared to a year ago, according to FactSet.

The Q3 financial reports arrive as U.S. oil prices trade well below $70 per barrel, after retreating amid diminished concerns that Israel might strike Iran’s oil infrastructure. U.S. oil prices have traded between $65 and $78 since July.

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Chevron stock edged up 0.6% during early trading on Thursday. Chevron is up 1.2% for October, after a two-month decline. Exxon Mobil shares gained 1% Thursday morning. It was headed for a third tight month, ending with a gain or loss of less than 1%.

In the second quarter, Exxon Mobil booked its first profit increase after four quarters of declines. However, Chevron Q2 EPS fell 17%. Exxon and Chevron both saw profit dips in Q1, primarily due to weaker refining margins and to natural gas prices coming down from last year’s highs.

Exxon Mobil Vs. Chevron: Guyana

In 2023, the two supermajors also saw earnings and revenue declines, as oil and natural gas prices weakened vs. prior-year levels — which had been driven higher by Russia’s invasion of Ukraine.

Meanwhile, the two companies are also locked in a legal battle over their operations in Guyana. Chevron and Exxon Mobil are in an arbitration fight over Chevron’s $53 billion acquisition of Hess (HES), which would hand CVX a significant portion of Guyana’s oil-rich offshore Stabroek block.

Exxon, which operates the Guyana project, claims it has the right of first refusal to the Hess deal. The arbitration hearing is scheduled for May 2025. Chevron previously hoped for a decision in Q4 2024.

Chevron Buys Into Stabroek

Toward the end of 2023, Chevron agreed to acquire Hess for $53 billion, also acquiring Hess’ share of the 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, which includes both completed wells, and wells under development. China’s CNOOC International holds a 25% interest in the project. Hess holds a 30% stake. The Exxon-led venture has been drilling wells 18,000 feet below the seafloor, with drillships working in water as deep as 8,900 feet.

Exxon Mobil’s affiliate Esso Exploration & Production Guyana Limited is the consortium operator. Hess and the Energy Information Administration estimate the area off Guyana’s coast holds recoverable resources of more than 11 billion barrels of oil equivalent. Industry projections have Guyana producing more than 1 million barrels per day (bpd) by 2026.

The U.S. Gulf of Mexico offshore complex currently produces 1.9 million barrels of oil per day. The Energy Information Administration estimates the Permian Basin in west Texas and New Mexico will produce about 6.3 million barrels per day in 2024. It is estimated to hold 50 billion recoverable barrels in the Wolfcamp and Bone Spring formations alone.

In the second quarter, Exxon Mobil submitted an application to the Guyanese Environmental Protection Agency for a proposed seventh project. Production capacity is expected to be 120,000 to 180,000 barrels per day, with anticipated startup in 2029, pending Guyanese government approval.

Guyana Production

Hess reported on Wednesday that its Guyana net production totaled 170,000 bpd in Q3, up 57% from 108,000 bpd a year ago. The company said this increase was primarily due to the startup of the third development, Payara, in the Stabroek block. Hess forecasts Q4 Guyana net production ranging from 185,000 bpd to 190,000 bpd.

Exxon Mobil is producing around 400,000 bpd in Guyana, all from the Stabroek. Exxon expects output of 1.2 million bpd by the end of 2027. At the end of the second quarter, Exxon Mobil predicted a drop in Guyana volumes of around 80,000 barrels of oil per day in Q3 due to project work.

Exxon Mobil Outpaces Chevron In 2024

Exxon Mobil stock has neatly outperformed Chevron so far this year. CVX is down around 1% in 2024. It is 10% below its high for the year, set in May.

Meanwhile, Exxon Mobil stock has advanced 17%. It rallied to a record high in early October as U.S. oil prices jumped above $77 a barrel on rising tension in the Middle East.

Meanwhile, Shell (SHEL) edged up a fraction early Thursday after delivering better-than-expected third-quarter results, with EPS running flat compared to a year ago. On Tuesday, BP (BP) reported third-quarter earnings cratered 28% while revenue missed views. BP stock fell more than 5% Tuesday and is at its lowest level since September 2022.

U.S. oil prices traded around $69.50 per barrel on Thursday, as brisk U.S. production and weak demand in China continue to weigh on the market. Brent futures, the international benchmark, moved above $73 per barrel on Thursday.

Both U.S. and Brent oil prices are down 13% in 2024. Natural gas prices have swung higher and lower, but are currently trading two cents below where they started the year.

Chevron stock has a 41 Composite Rating out of a best-possible 99. CVX also has a 24 Relative Strength Rating and a 65 EPS Rating.

Please follow Kit Norton on X @KitNorton for more coverage.

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