America's largest oil companies reported a blockbuster quarter after the Iran war caused a historic dislocation in global markets that sent energy prices soaring.
At ExxonMobil, profits more than doubled from a year earlier to their highest level since 2022, while Chevron reported its highest quarterly earnings on record.
Exxon said high oil-and-gas production and its nearly two dozen refineries from Texas to Singapore pushed earnings to $14.5 billion. The total was its highest since the peak of an energy crisis kicked off by Russia's invasion of Ukraine.
Chevron reported earnings of $12.1 billion that rose nearly fivefold from the same period last year, driven by record oil-and-gas production and refining throughput.
Both companies raked in cash as the prolonged closure of the Strait of Hormuz waterway between Iran and Oman cut off a big chunk of the world's fuel supplies. U.S. oil prices climbed as high as $112.95 a barrel in the quarter, and gasoline prices surged to the highest levels in four years.
"The second quarter was shaped by disruption, but defined by execution," Exxon Chief Executive Darren Woods said in a statement. "Markets were supportive, but our performance reflected the strength of the portfolio and operating model we have built over many years."
Exxon's adjusted earnings came in at $3.52 a share, slightly below Wall Street's forecast of $3.56, according to FactSet. Chevron's was $6.06, topping analysts' estimates of $5.55.
Margins for making products like jet fuel, diesel and gasoline climbed to record highs. Oil prices eased toward the end of the quarter on hopes for a lasting peace deal between the U.S. and Iran that would fully reopen the Strait, but prices for products kept climbing -- allowing refineries to profit from the difference between the cost of crude and the revenue generated from refined petroleum products.
Exxon Chief Financial Officer Chief Neil Hansen said the oil market's biggest pinch point isn't necessarily stunted oil flows through the Strait -- it's the lack of refining capacity around the world.
Crude prices have stayed within historical ranges throughout the crisis because of China's swift drop in oil purchases and demand destruction in some countries, he said. But the supply crunch has shifted to products because of a decline in refining in places like Russia and China, which both banned some product exports during the quarter.
"The level of refining capacity that is available is the lowest we've seen," Hansen said, largely due to fuel-market developments beyond the Strait. "That has resulted in, really, record refining margins."
Exxon said it made the largest amount of diesel in a quarter since at least 2014, and its refining unit collected about $5.5 billion in earnings, up from about $1.4 billion in the same period last year. Exxon also cited years of structural cost savings, which have reached $16.3 billion since the company began overhauling operations a few years ago.
Exxon reported its highest oil-and-gas production in over two decades, when excluding its disrupted output in the Middle East, which it has said accounts for roughly 20% of its global production. In the Permian Basin, the largest U.S. oil field, its output climbed to a record 1.8 million barrels a day. The U.S. oil giant's oil production unit collected $7.9 billion in earnings for the quarter, up from $5.4 billion in the same period last year.
Chevron's U.S. oil-and-gas production climbed to a quarterly record of 2.1 million barrels a day, up 382,000 barrels a day from the same period last year. That growth was driven primarily by assets it bought from Hess last year, following a protracted arbitration fight with Exxon, as well as the Permian.
Hess's crown jewel asset was its 30% stake in an Exxon-led consortium in Guyana, a generational oil discovery. Exxon said a fifth massive oil-production vessel -- capable of pumping 250,000 barrels a day -- has set sail for Guyana from shipyards in Asia and is expected to begin production in the fourth quarter.
Chevron CFO Eimear Bonner said the company isn't changing its spending plans because of market volatility and that it's growing production 7% to 10% this year.
In Venezuela, where Chevron is the only active U.S. oil producer, the company has boosted oil production 15% over the past six months to about 280,000 barrels a day.
"We're in active discussion for additional opportunities, and we're very encouraged with how those discussions are ongoing," she said.
Exxon and Chevron both showered investors in cash and emphasized their capital discipline. Exxon paid out $9.4 billion in dividends and share repurchases combined, while Chevron spent $6.6 billion. Exxon has also spent $13 billion in capital expenditures in the first half of the year, with a spending plan for the year that is 20% higher than its nearest competitor.
Exxon's Hansen said the company used part of the quarterly cash influx to cut down its net debt by $7 billion in the quarter, and its stronger balance sheet will allow it to "pursue advantaged opportunities."
In late 2023, after profits surged the prior year, Exxon snapped up Pioneer Natural Resources, a big West Texas oil producer, for $60 billion in stock. Exxon isn't in a rush to dive into the mergers-and-acquisitions market again, Hansen said, but "we're always looking."
"We're in the catbird seat," he said. "We can be very picky, very patient."
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