Exxon Mobil and Chevron earnings fall as Iran war disrupts oil shipments

Surging oil prices due to the Iran war did not result in a windfall for Exxon Mobil and Chevron in the first quarter.

The two biggest U.S. oil companies reported profits on Friday that fell dramatically compared to the same period last year. Exxon’s net income declined 45%, while Chevron’s tumbled 36%.

Share of Exxon and Chevron were little changed premarket after they both beat Wall Street’s earnings estimates.

Oil prices had been depressed during the first two months of the year as the market anticipated a surplus, but suddenly spiked after the U.S. and Israel Attacked Iran on Feb. 28. Prices have surged 57% as the war has caused the largest oil supply disruption in history.

Exxon said its Middle East production will fall by 750,000 barrels per day compared to 2025 if the Strait of Hormuz is closed for the entire Second quarter. Its throughput to refiners will fall by 3%, the company said.

Exxon CEO Darren Woods told CNBC that about 15% of the company’s production has been impacted by the war. it will take a month or two for oil flows to ramp up once the strait reopens, Woods said. It also takes about a month for barrels shipped from the Persian Gulf to reach their customers, he said.

Here’s how Exxon and Chevron did compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

• Exxon posted adjusted earnings of $1.16 per share, beating estimates of $1.00 per share.
• Exxon posted revenue of $85.14 billion, beating estimates of $82.18.
• Chevron posted adjusted earnings of $1.41 per share, beating estimates of 95 cents per share.
• Chevron reported revenue of $48.61 billion, missing estimates of $52.1 billion

Exxon warned in early April the Iran war would weigh on its results. It has open financial hedges that proved unfavorable in the quarter as the war triggered a sudden and massive supply disruption.

Exxon lost nearly $4 billion on these trades due to what it described as a “timing effect.” The value of the product shipments that it hedged were not counted in the quarter because their delivery was not complete.

The impact, however, is temporary and the hedges will ultimately result in a net profit in subsequent quarters after the products are delivered, Exxon said. It also took a $700 million hit on closed hedges that were not offest by physical deliveries due to the Middle East disruption.

As a result, Exxon posted net income of $4.2 billion, or $1.00 per share, down from $7.7 billion or $1.76 per share last year. Excluding the negative timing effects and the other items, it earned $8.8 billion, or $2.09 per share. Removing the $700 million hit, Exxon earned $1.16 per share.

Chevron posted a profit of $2.2 billion, or $1.11 per share, in the quarter down from $3.5 billion, or $2 per share, one year ago. It booked a $2.9 billion charge related to its financial hedges.

After adjustments, Chevron earned $1.41 per share to beat Wall Street’s estimates of 95 cents. It was the biggest earnings beat since October 2020.

Exxon’s refiners were particularly hard hit, posting a loss of $1.26 billion due to the timing effects on financial hedges not offset by physical deliveries. Excluding those effects, its refiners posted a profit of $2.8 billion, a more than 200% increase over $856 million in last year’s quarter.

Chevron’s refiners swung to a loss of $817 million compared with a profit of $325 million in last year’s quarter, due to the lower margins, the timing effects on financial hedges and higher transportation costs.

Exxon’s production segment posted a profit of $5.74 billion, down 15% from $6.76 billion in the same period last year. It pumped 4.6 million barrels per day in the quarter, a slight increase over last year’s quarter.

Chevron’s production segment posted profit of $3.9 billion, a modest 4% increase over $3.8 billion in the year-ago period. It produced about 3.9 million bpd, a 15% increase over 3.4 million bpd last year’s quarter.