ExxonMobil and Chevron are expected to make a combined profit of almost $100bn from 2022 as the US corporate oil giant capitalizes on soaring fossil fuel prices following Russia’s invasion of Ukraine.
The profit bonanza is seen by oil majors as evidence after companies resisted pressure from activists and some shareholders to move away from the core oil and gas business and cut climate-warming emissions.
Exxon is expected to earn more than $56bn in 2022 and Chevron is set to reach $37bn, a record high for both companies, according to Wall Street estimates compiled by S&P Capital IQ.
This is a sharp reversal from 18 months ago when the company was still struggling to recover from the crash in crude oil prices driven by the coronavirus pandemic and reeling from shareholder defeats over its climate strategy. Pressure on the company peaked when Exxon lost control of three board seats to activist hedge fund Engine No. 1 last May.
But companies have largely resisted calls to overhaul their strategy. Exxon’s chief executive, Darren Woods, said recently that the company’s bumper year is proof that it is “on the right track”.
Exxon has unveiled plans to buy back $50bn of its own stock through 2024, including about $15bn in repurchased shares. It also raised its dividend earlier in 2022. Chevron said it would buy back about $15bn of shares.
The focus on stock repurchases has attracted political attention as consumers pay high energy prices, which has led to high inflation rates in the US and Europe.
Amos Hochstein, president Joe Biden’s top international energy adviser, told the Financial Times in December that the focus on stock buybacks was “un-American” and that the company needed to do more to increase supply and cool prices.
But big shareholder returns and rising energy prices have benefited investors, lifting the company’s share price to a 2022 high despite a broader market sell-off, although it has fallen slightly in recent weeks. Exxon’s stock closed the year at around $110 a share on Friday, up 80 percent since the end of 2021. Chevron rose 53 percent, closing at about $180 a share.
Both companies say oil and gas will dominate the global economy for decades to come, despite widespread efforts to wean the economy away from fossil fuels to fight climate change.
Exxon’s recently released long-term energy outlook predicts oil demand will continue to grow until at least the end of 2040. It predicts the world will consume millions of barrels a day more than it does now by 2050, when many governments say they want the economy to grow. have net zero carbon emissions. Natural gas consumption will grow nearly 50 percent during that time, Exxon projects.
The outlook contrasts with British rival BP, which has pledged to halve oil production by 2030 and expects oil demand to fall from the start of the next decade and be at least 20 percent lower by 2050.
Chevron chief executive Mike Wirth recently told the FT that fossil fuels will still be “running the world . . . 20 years from now”.
A bullish fossil fuel demand outlook supports the company’s plans to expand output in the coming years, although it says it will direct more cash to low-carbon investments such as carbon capture and storage, hydrogen and biofuels.
Exxon plans to tap oil fields such as the Permian in Texas and New Mexico as well as deepwater fields in Guyana and Brazil to increase output by about 15 percent by 2027.
Carbon Tracker, a climate-focused think-tank, said in a new report that long-term fossil fuel growth plans are inconsistent with the government’s climate goals in the Paris Agreement and create financial risks.
“Companies are committing tens of billions to projects that won’t break even if the government makes climate promises, and investors need to understand the implications,” said Mike Coffin, an analyst at the group.