Falling oil prices weigh on ExxonMobil and Chevron's profits in 2023

The fall in oil prices weighed on the results of ExxonMobil and Chevron in 2023 after a 2022 year of historic profits due to the rise in energy prices due to the Russian invasion of Ukraine. The two main US listed oil companies published their annual accounts this Friday. They reflect multimillion-dollar results, the best in the last decade, with the exception of the extraordinary previous year. ExxonMobil's profits fell 35.4% to $36.01 billion from a record $55.74 billion a year earlier, while Chevron's profits fell 39.7% to $21.369 billion.

Lower oil prices weighed on both profitability and turnover. ExxonMobil's revenues fell 16%, to $344,582 million for the year as a whole, according to the company's accounts. The company increased its investments and spending on oil exploration by 3,621 million compared to the previous year, up to a total of 36,625 million in 2023. For its part, Chevron's turnover fell 18.4%, to 200,949 million dollars, according to its results report.

Still, both companies have been able to increase production, especially in American fields. In the case of ExxonMobil, the good progress of its fields in the Permian basin (mainly in Texas and New Mexico) is added to its profitable wells in Guyana, on which Chevron has also set its sights and which it will access in if the Hess purchase is closed.

Exceeds forecasts

In the fourth quarter, Exxon's numbers have exceeded analysts' expectations. Revenue fell 11.6%, to 84,344 million dollars, while profit fell 40%, to 7,630 million. Fourth-quarter results included $2.3 billion in negative one-time items, including a $2 billion impairment as a result of regulatory hurdles in California that prevented production and distribution assets from returning to operation. Profits without these items would be $10 billion, according to the company.

Fourth quarter results were reinforced by the impact of the revaluation of portfolio derivatives, improved volumes and product mix due to the advantages of the Guiana and Permian assets, and increased margins of chemicals. These factors were partially offset by lower refining margins and seasonally higher expenses.

“Our consistent strategy and excellence in execution across the business have enabled us to deliver industry-leading profits and return more cash to shareholders than our competitors in 2023,” said Darren Woods, president and CEO, in a statement. release. “These results demonstrate the fundamental improvements we have made to our business, reflecting our progress in improving our portfolio through investments in advantageous projects and select divestitures, while driving a greater level of efficiency and effectiveness across the business,” he added. .

In its future growth strategy, the oil company tries not to put all its eggs in the same basket. Although it has redoubled its commitment to fossil fuels with the largest acquisition in decades, it has also taken a step to make electric cars profitable.

Thus, on the one hand, it announced an agreement in October to purchase with Pioneer Natural Resources in an operation worth $59.5 billion. Closing of the transaction is scheduled for the second quarter of 2024, pending approval from regulatory bodies and Pioneer shareholders.

In parallel, also in the fourth quarter, it announced its new business Mobil Lithium, with plans to become a leading producer and increase US supplies of lithium for the global battery and electric vehicle markets. Its production method has the potential to produce large quantities of lithium with less environmental impact than traditional mining operations, according to the company, which is working on the first phase of lithium production in southwest Arkansas, an area that is home to important deposits. ExxonMobil plans first production for 2027 and by 2030, it aims to produce enough to supply approximately one million electric vehicles per year.

Additionally, in November it closed the purchase of Denbury for $4.8 billion in shares to enter the CO² capture and storage business. The company now has the largest owned and operated carbon dioxide pipeline network in the United States, with 1,300 miles, including nearly 925 miles in Louisiana, Texas and Mississippi, one of the largest U.S. CO² emissions markets. The company also has access to more than 15 strategically located onshore CO² storage sites.

Growing up in Guyana

For its part, Chevron's revenue fell 16% in the fourth quarter, to $47.18 billion, and profit fell 62%, to $2.259 million. The company's big bet is the purchase of the independent oil company Hess for $53 billion, announced last October and pending approval. The purchase of Hess is also a bet on Guyana, the country where oil production is growing the most in the world. Chevron acquires the Stabroek block in the country, which it defines as “an extraordinary asset.” At the same time, it acquired Hess' assets in North Dakota in the Bakken formation, which has emerged in recent years as one of the largest production areas in the United States thanks to shale oil.

Along with this, the company has closed the purchase of another smaller company, PDC, which strengthens it in the Permian basin, and advances in other projects. It has also taken some timid steps to reduce emissions. In 2023 it closed the acquisition of a majority stake in ACES Delta, which is developing an ecological hydrogen production and storage center in Utah; adapted the El Segundo, California, refinery to process 100% renewable raw materials and acquired land to expand the Bayou Bend carbon capture and sequestration center, on the US Gulf of Mexico coast.

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