Oil majors bet on share buybacks as they take blowout $51bn earnings in Q2

High oil prices and margins lift Exxon, Chevron, Shell and Total to best quarters in history

Petrol prices are displayed at an Exxon station in Houston, Texas. Exxon and Chevron posted record high earnings during the second quarter of 2022. AFP

The two largest US oil companies, Exxon Mobil and Chevron, posted record revenue on Friday, bolstered by surging crude oil and natural gas prices and following similar results for European majors a day before.

The US pair, along with UK-based Shell and France's TotalEnergies, combined to earn nearly $51 billion in the most recent quarter, almost double what the group brought in for the same period a year ago.

Exxon outpaced its rivals with a $17.9bn quarterly profit, the most for any international oil major yet.

Chevron, Shell and Total ran to catch up with Exxon's aggressive buyback programme, which was unaltered.

The four returned a total of $23bn to shareholders in the quarter, capitalising on high margins derived from selling oil and gas. The fifth major, BP, reports next week.

The companies posted strong results in their production units, helped by the surge in benchmark Brent crude oil futures, which averaged around $114 a barrel in the quarter.

High crude oil prices can cut into margins for integrated oil majors as they also bear the cost of crude used for refined products.

However, following Russia's invasion of Ukraine and numerous shutdowns of refineries worldwide after the coronavirus pandemic, refining margins exploded in the second quarter, outpacing the gains in crude and adding to earnings.

“The strong second quarter results reflect a tight global market environment, where demand has recovered to near pre-pandemic levels and supply has attrited,” said Exxon chief executive Darren Woods, in a call with analysts.

“Growing supply will not happen overnight.”

The results from the majors are sure to draw fire from politicians and consumer advocates who say the oil companies are capitalising on a global supply shortage to fatten profits and gouge consumers.

US President Joe Biden last month said Exxon and others were making “more money than God” at a time when consumer fuel prices surged to records.

This month, Britain passed a 25 per cent windfall tax on oil and gas producers in the North Sea. US politicians have discussed a similar idea, although it faces long odds in Congress.

A windfall tax does not provide “incentive for increased production, which is really what the world needs today”, said Exxon chief financial officer Kathryn Mikells.

The companies said they are merely meeting consumer demand, and that prices are a function of global supply issues and lack of investment.

The majors have been disciplined with their capital and are resisting increasing capital expenditure due to pressure from investors who want better returns and resilience during a down cycle.

“In the short term [cash from oil] goes to the balance sheet. There's no nowhere else for it to go,” Chevron chief financial officer Pierre Breber told Reuters.

Worldwide oil output has been held back by a slow return of barrels to the market from the Organisation of the Petroleum Exporting Countries and allies, including Russia, as well as labour and equipment shortages hampering a swifter increase in supply in places like the US.

Exxon earlier this year more than doubled its projected buyback programme to $30bn through 2022 and 2023.

Shell said it would buy back $6bn in shares in the current quarter, while Chevron boosted its annual buyback plans to a range of $10bn to $15bn, up from $5bn to $10bn.