US petroleum giants ExxonMobil and Chevron reported big jumps in second-quarter profits Friday, the latest boost from a recovery in oil prices that still feels shaky to many industry officials.
Exxon’s profit for the quarter ending June 30 nearly doubled to $3.4 billion, while Chevron nabbed $1.5 billion in earnings, up from a $1.5 billion loss in the year-ago period.
The big improvement in profits came on the heels of a recovery in oil prices in the wake of agreements by the Organization of the Petroleum Exporting Countries to limit production. Oil prices in the second quarter were about 15 percent above the level in the comparable 2016 quarter.
“These solid results across our businesses were driven by higher commodity prices and a continued focus on operations and business fundamentals,” Exxon chief executive Darren Woods said.
Other factors included better refining margins, higher natural gas prices and a restrained approach to capital spending.
Chevron chief executive John Watson said, “Second quarter results improved substantially from a year ago.”
“We’re delivering higher production with lower capital and operating expenditures.”
Despite the big jump, Exxon’s profits missed Wall Street expectations. Analysts also hit the company for a one percent drop in oil and gas production compared with the year-ago period.
By contrast, Chevron’s earnings bested analyst expectations and reflected a 10 percent increase in oil and gas production amid solid output at its Gorgon LNG project in Australia and its shale properties in Texas.
In morning trading, Exxon dropped 3.0 percent, while Chevron gained 2.1 percent.
– Cautious on investment –
Oil producers have been cautious in boosting investment, in part because of worries that oil prices could retreat again amid surging US shale production.
Oil services companies that reported earnings over the last week said US upstream investment remains solid, but international capital spending continues to lag.
Halliburton chief executive Jeffrey Allen Miller said aggressive drilling in North America boosted its US business, but the international market is likely to “move sideways” in part because of uncertainty about oil prices.
“Our international customers need confidence in commodity prices in order to overcome the duration risk in their projects,” Miller said.
US oil output has risen more than 10 percent from a year ago to 9.4 million barrels per day, according to data from the US Energy Information Administration.
Schlumberger chief executive Paal Kibsgaard said investors have been “spooked” into thinking production in the United States “will flood the markets and leave inventory levels elevated for the foreseeable future.”
John Hess, chief executive of midsized US oil company Hess, said he planned to trim $100 million from 2017 capital spending to $2.15 billion, citing “the current low price environment.”