Star Metro - US oil giants report huge profits in tight energy market

ExxonMobil scored a near tripling of third-quarter profits to $19.7 billion, a company record, while Chevron profits surged 84 percent to $11.2 billion.

The eye-popping reports drew a new snipe from President Joe Biden and came on the heels of hefty profits reported earlier this week by TotalEnergies and Shell that have reignited a European debate on windfall profits taxes.

The results show how the surge in crude prices in the aftermath of Russia's invasion of Ukraine has boosted the industry by lifting crude prices, as well as natural gas prices due to Europe's mobilization to offset lost natural gas imports from Russia.

Another factor has been elevated refining margins, partly due to operational woes at some plants, as well as the shuttering of some refineries during the pandemic and repurposing of other plants for renewable fuel instead of gasoline.

The strong refining margins have translated into higher gasoline prices, a major point of focus in the midterm US elections roiled by rising inflation.

Prices at the pump stand at a national average of $3.76 per gallon, up about 11 percent from the year-ago level. Prices topped $5 in June, hitting an all-time high.

Biden, who has alternated between slamming oil giants and prodding them to boost output, mocked a comment from ExxonMobil Chief Executive Daren Woods, who defended the industry's practice of returning extra cash to shareholders.

Woods, responding to criticism that the industry should return profits to the American people, said "that's exactly what we're doing in the form of our quarterly dividend," according to prepared remarks Friday.

Biden rejected that argument.

"Can't believe I have to say this but giving profits to shareholders is not the same as bringing prices down for American families," Biden tweeted.

- Tight market -

Officials from ExxonMobil and Chevron have met with the Biden administration, but the companies have maintained their spending policies, boosting production in the US Permian Basin and some other venues incrementally, but not opening the spigots towards massive new projects. The companies have continued to return cash to shareholders.

Chevron Chief Financial Officer Pierre Breber said the company planned for 2023 spending "near the top end of the range consistent with what our plans have been."

Chevron undertook a six percent dividend increase earlier this year and Chevron Chief Executive Mike Wirth said the company was currently at an "all time high rate" in terms of share repurchases.

Wirth described the global gasoline market as strained, saying the supply-demand balance constitutes a market "we really haven't seen probably in my career in terms of overall tightness."

Woods also described today's energy market in general as constrained.

"I'm optimistic that with time... that markets will come back into balance," Woods told Wall Street analysts. "But it's a function of time."

Woods vowed to maintain ExxonMobil's policy of "capital discipline" and sharply criticized new taxes on the industry.

"If you look at some of the windfall taxes that are being talked about within Europe, that's going to put additional pressure on refining margins," Woods said, adding that passage of the measures would lead to more underinvestment in refining and "capacity coming out of the market."

Shares of ExxonMobil rose 2.7 percent to $110.48 in afternoon trading, while Chevron gained 0.9 percent to $179.59.

L.Girard--SMC