By Christopher M. Matthews
Big oil companies returned to profitability during the first
quarter as they recovered from the unprecedented destruction of
oil-and-gas demand wrought by the coronavirus pandemic.
Exxon Mobil Corp. reported $2.7 billion in net income Friday,
its first quarterly profit since the pandemic erupted last spring,
while Chevron Corp. reported $1.4 billion in first-quarter profit.
The results were boosted by rising oil prices during the first
months of 2021, as countries around the world soften coronavirus
The largest European oil companies, BP PLC, Royal Dutch Shell
PLC and Total SE, all reported profits earlier in the week after
enduring huge losses last year.
"That recovery, which we had anticipated happening at some point
in time, is happening sooner than we anticipated," Exxon Chief
Executive Darren Woods said in an interview Friday. "As economies
are reopening and rebounding quicker, in some places, than
expected, we are seeing a demand response."
Oil companies endured one of their worst years on record in
2020, as Covid-19 lockdowns choked off demand for oil and gas as
road and air traffic fell precipitously. Exxon reported its first
annual loss in modern history in 2020 of about $22 billion.
But cautious optimism has been mounting that global economic
activity could return to pre-pandemic levels later this year as
vaccines become more widely available around the world.
Chevron Chief Financial Officer Pierre Breber said that demand
for gasoline and diesel was nearly back to pre-pandemic levels, and
that jet fuel is the last remaining overhang, with strong signs
that domestic air travel in the U.S. is picking up.
"As we look forward, the next couple of quarters look very
good," Mr. Breber said in an interview. "We feel good about our
ability to generate cash."
Chevron's net income was down about 62% from the same quarter
last year, but was a substantial increase from a $665 million loss
in the previous quarter. Exxon's $2.7 billion profit compared with
a $610 million loss a year ago. BP's profit more than tripled from
the previous quarter to nearly $4.7 billion, and Shell reported a
profit of almost $5.7 billion.
Share prices for the world's largest energy companies have moved
in tandem with oil prices that have rebounded markedly in recent
months. U.S. oil prices are up about 77% over the past six months,
while the shares of Exxon, Chevron, BP and Shell are collectively
up about 60%.
On Thursday, U.S. oil prices neared a six-week high of about $65
a barrel but fell around 2.6% Friday as traders eyed a build in
crude and gasoline stockpiles. The share prices of Exxon, Chevron,
BP and Shell were collectively down nearly 2% Friday.
The optimism about oil and gas demand rebounding is being
tempered by concerns about rapidly rising Covid-19 case numbers in
India and South America, said Bjornar Tonhaugen, an analyst at
Rystad Energy. Reduced economic activity in India alone may sap as
much as 900,000 barrels of oil a day from global demand, according
"For the moment optimism is helping prices, but every trader's
eyes are on India," Mr. Tonhaugen said. "The oil bulls are out
again but it's doubtful that they are having a confident and calm
In response to growing profits, Chevron, BP and Shell boosted
their payouts to investors. On Wednesday, Chevron increased its
quarterly dividend by 4%, while Shell also raised its dividend 4%,
the second increase since slashing it last year. BP said it would
buy back $500 million of shares. Total and Exxon held their
The weeklong freeze in Texas that left millions without power in
February affected profits for many of the companies, which both
produce oil in the state and own plants there to convert the
hydrocarbons into fuels and plastics.
Chevron's refining and chemical units reported $5 million in
profits, down from $1.1 billion a year ago, which Chevron CEO Mike
Wirth attributed to the February storm and continuing impact of the
pandemic. In total, the storm cut about $300 million from its
profit, Chevron said.
Exxon said the extreme weather reduced earnings by nearly $600
million. Meanwhile, analysts attributed the strong performance of
BP's trading unit to its ability to capitalize on substantial price
fluctuations during the storm.
Despite the improving conditions, Chevron has pledged to keep
capital expenditures austere. Mr. Wirth said capital spending
decreased 43% from last year during the quarter, citing its
corporate restructuring last year that saw as much as 15% of its
workforce laid off. Exxon also has pledged fiscal restraint, saying
its plan to cut annual capital spending by about 30% remains
Some investors are deeply skeptical of the industry
notwithstanding climbing commodity prices, according to Paul
Sankey, an independent oil and gas analyst. Most of the companies'
share prices are still trading below their pre-pandemic levels as
investors evaluate the firms' plans to navigate tightening global
regulations on carbon emissions.
Earlier this month, President Biden pledged to cut U.S.
emissions by about 50% from 2005 levels by 2030, targeting
greenhouse gases from power plants, buildings and the
transportation sector. Mr. Woods said Friday that Exxon is engaging
with officials on climate policy and has urged the government to
set a price on carbon, which it says would spur investment in
Mr. Sankey said the industry delivered poor results for years
from their core oil business before the pandemic, leaving some to
doubt they can reap profits from renewable energy or technologies
to reduce carbon emissions, which some of the companies have
promised to do.
"Their track record is not good enough for them to get into a
new theme, because they did so poorly on the old one," Mr. Sankey
Write to Christopher M. Matthews at
(END) Dow Jones Newswires
April 30, 2021 17:56 ET (21:56 GMT)
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