Refinery margin strength boosted the key oil majors in the third quarter.
One slide in ExxonMobil's investor presentation after its third-quarter earnings explains the financial situation for the integrated oil giants very neatly.
The knee-jerk answer might be, $100-per-barrel crude-oil prices (CL00), but that's not really the case - oil prices are not all that different than last year or in fact the 10-year average. Natural-gas prices are a little stronger, and chemicals margins are in fact worse.
How prices compare to their 10-year average.
But look at refining margins - wildly higher than anything the industry has experienced the last decade.
The war in Iran - and to a lesser extent, Ukraine's bombing of Russian refineries - has tightened the supplies of diesel, after a decade of refining capacity being brought offline due to what had been poor margins as well as the shift to biofuels.
It was refining margin strength that boosted profits at Exxon (XOM), Chevron $(CVX)$ and BP (BP).
Exxon and Chevron entered Friday with both stocks rising 52% this year, as BP's American depository receipts have gained 45%.
Exxon said U.S. Gulf Coast crude unit utilization was running at 100% as it saw the second-highest U.S. Gulf Coast diesel volume on record. Chevron said it had record quarterly U.S. crude throughput as BP refining availability was 96.5%.
The strategy, particularly at Chevron and BP, is to use these banner profits to reduce debt, as opposed to increasing capital expenditure or returning a greater proportion of profits through dividends and buybacks.
-Steve Goldstein
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