ExxonMobil, Chevron Benefit From Oil Price Rebound

ExxonMobil and Chevron, the two largest US oil groups, have reported earnings for the first quarter that show sharp improvements thanks to the rebound in oil and gas prices but also lasting effects from the financial pressure they were under during the downturn. The two companies have adopted differing strategies in recent years, but each has found it difficult to find enough money to pay for both production growth and rising dividend payments, Financial Times reported.

Both companies beat analysts’ expectations as they reported improved earnings for the first quarter, boosted by the oil and gas price rebound. Exxon’s earnings per share more than doubled year on year to 95 cents, while Chevron swung into profit with earnings per share of $1.41 for the quarter, compared to a loss of 39 cents for the equivalent period of 2016.

Chevron has been much more ambitious with its capital spending in recent years than Exxon. That allowed the company to confirm it was on course for strong production growth this year, but for now it is using asset sales to help cover its capital spending and dividend payments. Pat Yarrington, Chevron’s chief financial officer, said on a call with analysts that the company was still aiming to be “cash balanced” — covering its dividends and capital spending from cash flows — in 2017.

By contrast, Exxon, which has been more conservative on investment, was hit by a continued decline in production. But it is able to cover its dividend payments and its capital spending from its operating cash flows, excluding asset sales.

In 2014 Chevron’s capital spending was greater than Exxon’s, even though Exxon’s market capitalization was more than 80% larger as it spent heavily on the giant Gordon and Wheatstone liquefied natural gas projects in Australia.

Chevron’s shares are up 18% since the oil price started bouncing back from their lows last year while Exxon’s are up 5%.  Now both companies are emphasizing plans to step up investment in US shale oil and similar resources as ways to increase production.