All five global oil majors reported blockbuster third-quarter earnings on Thursday and Friday. Even after paying for their operations and capital projects, they had $67 billion in cash left over for whatever else they wanted to do with it. That's up from $29 billion a year ago. It's part of a war-driven windfall that research firm Wood Mackenzie says could bring the global industry half a trillion dollars this year.
The cash haul makes the oil companies stand out at a time when Big Tech has been moving in the opposite direction -- burning cash to fund the artificial-intelligence buildout. Amazon.com stock, for instance, fell on Friday after its free cash flow went negative for the third quarter in a row.
The question now is what the energy companies will spend all of this money on. Will they plow it back into drilling, buying competitors, building new refineries, or perhaps preparing for the energy transition? Their answers: Nope, nope, nope, and not a chance.
What stands out from third-quarter earnings is just how reticent the oil companies are to spend their cash. They're mostly socking it away for a rainy day instead of initiating new projects or even sending more of it back to shareholders. That may please cautious investors, who see these companies as careful stewards of money and a good hedge against the ups and downs of the AI boom. But it also leaves questions about where the companies go next.
In the old days, if energy companies made a windfall like this during an extended period of high oil prices, they would almost certainly have boosted their spending on drilling. But since the last sustained oil crash about a decade ago, oil companies have become much more careful about spending, in an attempt to soften the boom-and-bust cycles that have turned off investors in the past. For most investors, that's what they want. Oil companies can confidently stow away the money they're making today in a rainy-day fund. It may cap their upside, but it also limits their eventual downside.
Chevron, for instance, spent even less on capital projects this quarter than it did in 2025. And it has barely boosted its shareholder returns. The company lifted its dividend by 4% before the war in January, and hasn't increased it since. And the company has actually spent less on share buybacks this year than it did last year. Chief Financial Officer Eimear Bonner told Barron's in an interview that the company doesn't want to change how it spends money, given the volatile nature of the oil market.
"We have a strong record of being consistent through the cycles, being steady through the cycles," she says. "So, right now, we're not doing anything different with our capital allocation."
Oil companies aren't just being careful about how they use their cash -- they're being careful with how they talk about it, too. It isn't a great look to be making money hand over fist when people are struggling to pay for gasoline. Celebrating blockbuster earnings results can attract the wrong kind of attention, like wearing a gold Rolex on the subway.
In the past, politicians have criticized oil companies for "price gouging" when they profit off high prices driven by war or other geopolitical strife. In Europe, they've levied windfall taxes on oil firms at times like this. Even President Donald Trump, who has otherwise passed big tax breaks and industry-friendly regulation, has lashed out at the industry during profit sprees.
ExxonMobil Holdings CEO Darren Woods addressed high consumer prices at the start of Exxon's earnings call on Friday. "We recognize the impact high prices have on people's lives and economic growth," he said. "We always have, which is why we have been constantly focused on efficiently growing, advantaged production to keep markets supplied."
Exxon may have had the best quarter of any oil major. Its cash haul tripled, to $19.1 billion. Exxon refines more fuel than any non-government-owned company in the world, and its margins ballooned because of a worldwide shortage of diesel fuel. Nonetheless, the company isn't doing a lot with the cash. It boosted its dividend, but only by 4%, and announced that shareholder buybacks next year would be about the same as this year. It also has spent less on capital projects this year than last.
The upshot is that oil company balance sheets are as solid as they've been in years, if not decades. By next year, both Exxon and Chevron are expected to have negative net debt -- meaning they'll hold more cash than debt -- after both started this year with over $30 billion more debt than cash.
The windfall may have been more important for BP than for any other company. It came into the year with a particularly daunting set of liabilities, including obligations that have been sitting on its book for over a decade. The company agreed in 2015 to pay up to $18.7 billion in local, state, and federal settlements over the course of 18 years for its role in the 2010 Deepwater Horizon disaster.
Now those liabilities are set to go away much sooner. Earlier this month, BP announced it would accelerate payments to the state of Louisiana, wrapping up all its remaining payments in a lump sum now. And on Friday, the company said it would use the excess cash flow it's making today to pay off the rest of the roughly $6 billion it still owes from the spill.
BP's net debt fell to $13.9 billion in the quarter, from $22.3 billion in the second quarter, allowing the company to hit its debt target a year ahead of schedule.
BP stock has lagged behind its peers over the past decade. But its progress in whittling the debt is starting to turn heads on Wall Street. Citi analyst Alastair Syme said that the company's valuation discount, which he measures based on cash flow, "is becoming hard to ignore." Even after shares have risen 43% this year, he sees another 8% gain in store.
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