Despite the Iran conflict driving up oil prices, Exxon Mobil and Chevron reported significant year-over-year profit declines in the first quarter. Exxon Mobil's net profit fell by 45%, while Chevron's net profit decreased by 36%. Both companies' earnings surpassed Wall Street expectations, resulting in relatively stable stock prices.
In the first two months of the year, oil prices remained low due to market expectations of a supply glut. However, prices surged sharply following the joint U.S.-Israel attack on Iran on February 28. The conflict caused the largest crude supply disruption in history, driving international oil prices up by 57% cumulatively.
Exxon Mobil warned that if the Strait of Hormuz remains closed throughout the second quarter, its Middle East crude production would decrease by 750,000 barrels per day compared to 2025, and its refinery feedstock throughput would decline by 3%. CEO Darren Woods stated in a CNBC interview that approximately 15% of the company's crude production capacity has been affected by the conflict. He noted that once the Strait of Hormuz reopens, restoring crude transport flows could take up to two months, and shipping crude from the Persian Gulf to customer destinations would require about one month.
According to a Refinitiv analyst survey, the actual performance of both giants compared to Wall Street expectations was as follows:
Exxon Mobil: Adjusted earnings per share were $1.16, exceeding the expected $1.00; revenue was $85.14 billion, higher than the expected $82.18 billion. Chevron: Adjusted earnings per share were $1.41, significantly above the expected $0.95; revenue was $48.61 billion, below the expected $52.1 billion.
Woods revealed that during the conflict, Exxon Mobil redirected approximately 13 million barrels of crude to supply constrained markets. However, this redirection had a negative accounting impact on first-quarter earnings. The company's trading division had established financial hedge positions in advance to lock in profits for this crude, but since the shipments were still in transit, delivery revenue was not recognized in the quarter. This timing mismatch resulted in an approximate $4 billion paper loss for the quarter. Exxon Mobil described the impact as temporary, noting that the hedge positions would realize net gains in subsequent quarters once the crude deliveries are completed.
Woods stated, "This represents deferred profit. We want to make it clear to investors that the benefits of our current efforts to meet market demand will not be fully reflected in this quarter's earnings." Additionally, due to Middle East supply disruptions, some of Exxon Mobil's closed hedge contracts could not be matched with physical deliveries, leading to an extra $700 million loss.
The financial report showed that Exxon Mobil's first-quarter net profit was $4.2 billion, or $1.00 per share, compared to $7.7 billion, or $1.76 per share, in the same period last year. Excluding the negative timing impact and other one-time items, actual profit was $8.8 billion, or $2.09 per share. After adjusting for the additional $700 million loss, adjusted earnings per share were $1.16.
Chevron CEO Mike Wirth indicated that the company's exposure to the Middle East conflict is considerably lower than that of its peers. Although Chevron has operations in Saudi Arabia, Kuwait, and Israel, their scale is much smaller compared to its core assets in the Americas, Asia, and Africa. Wirth said in a CNBC interview, "The impact of the Middle East situation on us is much smaller relative to other oil companies."
Chevron reported a first-quarter net profit of $2.2 billion, or $1.11 per share, down from $3.5 billion, or $2.00 per share, a year earlier. Despite being less affected by the conflict, the company recorded a $2.9 billion impairment charge related to financial hedges. Chevron's adjusted earnings per share of $1.41 significantly exceeded the Wall Street consensus estimate of $0.95, marking the largest beat since October 2020.
Due to timing mismatches in financial hedges and unmatched physical deliveries, Exxon Mobil's refining business reported a loss of $1.26 billion in the first quarter. Excluding this disruption, the refining business would have earned $2.8 billion, an increase of over 200% compared to $856 million in the same period last year. Chevron's refining business turned to a loss, reporting a deficit of $817 million for the quarter, compared to a profit of $325 million a year ago, primarily due to lower margins, hedge timing effects, and increased transportation costs.
Exxon Mobil's crude production segment earned $5.74 billion in the first quarter, down 15% from $6.76 billion a year earlier. Daily crude production averaged 4.6 million barrels, showing a slight increase year-over-year. Chevron's production segment earned $3.9 billion, up 4% from $3.8 billion a year ago. Daily crude production averaged approximately 3.9 million barrels, a 15% increase compared to 3.4 million barrels in the same period last year.
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