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Surging US oil production helped ExxonMobil and Chevron notch their second-biggest annual profits in a decade despite a slide in prices that tempered earnings from the records hit in 2022.
America’s oil supermajors increased output sharply in their own backyard in 2023, pursuing a strategy of doubling down on oil and gas that has prompted blowback over their commitment to cutting emissions.
Exxon posted full-year net income of $36bn, down from $55.7bn the previous year, but otherwise its biggest since 2012.
Chevron’s net income of $21.4bn was down from $35.5bn the previous year, but otherwise its strongest since 2013.
Exxon’s chief financial officer Kathryn Mikells hailed a “great end to a great year”. Shares in Chevron were up 1.1 per cent in pre-market trading in New York, while Exxon rose 0.7 per cent.
High commodity prices in the wake of Russia’s full-scale invasion of Ukraine pushed oil and gas companies globally to record profits in 2022 before receding last year.
Both US supermajors increased domestic production in 2023, contributing to a boom in American output that took the market by surprise and helped keep a lid on prices even as the Opec+ group of oil exporters implemented substantial production cuts.
The US pumped 13.3mn barrels of oil a day in November, the last month for which data is available from the Energy Information Administration, more than any country in history.
Much of the production growth has focused on the sprawling Permian Basin, which stretches across Texas and New Mexico.
Exxon said combined 2023 output in the Permian and Guyana — where it has a stake in the biggest oil discovery of the past decade — was up 18 per cent. Its overall US oil output rose to 851,000 barrels a day during the quarter from 789,000 b/d a year ago.
Chevron increased its Permian production by 10 per cent in 2023, despite struggles with the productivity of ageing wells in the oilfield earlier in the year. It produced 1.16mn b/d in the US in the quarter versus 895,000 b/d previously, boosted in part by its acquisistion of PDC Energy.
“We had a strong quarter and it was really led by record production in the Permian,” Chevron’s chief financial officer Pierre Breber told the Financial Times. “There’s always things that are happening — it’s a big business — but we delivered on the plan.”
Exxon and Chevron have committed to increasing oil and gas production even as some of their European rivals shift to renewable sources such as wind and solar. Both companies in October announced megadeals to acquire rivals, which are being reviewed by US regulators.
Exxon is buying Pioneer Natural Resources, the biggest producer in the Permian, for $60bn, while Chevron is paying $53bn for Hess, giving it access to the Guyana discovery as well as assets in the Bakken shale of North Dakota.
The US supermajors’ oil and gas focus has allowed them to ride the wave of high prices but also attracted increasing climate scrutiny.
Chevron has recently been accused of falling behind other producers on climate, opting not to sign up to a decarbonisation charter at the COP28 conference in Dubai and becoming the only major outside of a UN-led methane reporting programme that Exxon signed up to in November.
Breber dismissed the criticism, pointing to the company’s investment in low-carbon businesses such as biofuels, green hydrogen and carbon capture. “We’ll get assessed on the results,” he said.
Exxon has taken the unusual step of suing climate activists to block an emissions resolution from appearing at its annual meeting, arguing the regulators have been too lax in allowing repeat motions on to the ballot.
“We support the right of investors to bring proposals, but the process to get proxy proposals excluded is just flawed, with activists that are masquerading as investors who make the same proposals year after year that are garnering only minimal support along the way,” said Mikells.
Both companies ratcheted up capital expenditure during the year as Wall Street eased constraints on the industry’s ability to spend. Exxon’s outlay rose from $22.7bn to $26.3bn, while Chevron’s was up from $12bn to $15.8bn.
They also ramped up share buybacks and dividends following last year’s profit haul, distributing $32.4bn and $26.3bn, respectively, to investors.
Exxon’s net income for the fourth quarter was $7.6bn compared with $12.8bn the previous year. Chevron’s fell from $6.4bn to $2.3bn. Both companies were hit by writedowns flagged in January relating to paring back investment in California, where regulators have taken a strong line against fossil fuel producers.