Rising crude prices helped Chevron Corp and Exxon Mobil Corp easily beat analysts’ quarterly profit expectations on Friday, setting an upbeat tone as the two companies press ahead with shale oil expansions.
While cost cuts and asset sales provided a boost to both companies, the results highlighted the slowly improving dynamics for the energy industry as oil prices CLc1 LCOc1 have climbed more than 50 per cent since early 2016.
First-quarter results were especially robust at Exxon, with quarterly profit more than doubling to 4.01 billion dollars, even as production fell 4 per cent.
Chevron swung to a 2.68 billion dollars quarterly profit and turned cash flow positive, earning more than it spent, a milestone Wall Street analysts had long sought.
Cash flow should continue to rise further, Chief Financial Officer Pat Yarrington told investors on a Friday conference call.
Chevron’s results were helped by $2.1 billion in asset sales.
The company has sold more than five billion dollars in assets since last year and is seeking buyers for its Canadian oil sands business, sources have told media.
If Chevron sells the business, “we’d want to make sure we got full value for it,” Yarrington said.
Shares of both Exxon and Chevron rose less than one per cent in afternoon .
Their energy peers, BP Plc (BP.L) and Royal Dutch Shell Plc (RDSa.L), are set to report quarterly results next week.
Looming over the large international oil companies, though, is uncertainty over whether the Organization of the Petroleum Exporting Countries will extend a production cut past June when it meets next month in Vienna.
Should the cut not be continued, oil prices will likely drop, pushing the sector back into recession.
Jeff Woodbury, Exxon’s head of investor relations, said while the company believes underlying global oil demand remains strong, high inventories and new supplies coming into the market “indicates a need to be cautious.”
Chevron and Exxon expanded production in their American shale portfolios during the quarter, with both deciding the low-cost fields offered an easy opportunity to boost profit. They have laid out plans to increase drilling in those fields this year.
Chevron, the second largest leaseholder in the Permian Basin, which is the largest American oilfield, has devoted much of its 2017 capital budget to shale projects.
Chief Executive Officer John Watson told media earlier this month the Permian was vital to Chevron’s growth.