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Exxon, Chevron Beat Expectations Thanks to Permian Oil Surge

Exxon, Chevron Beat Expectations Thanks to Permian Oil Surge

(Bloomberg) -- Exxon Mobil Corp. and Chevron Corp. posted earnings that surpassed analysts’ expectations, buoyed by surging oil output in the Permian Basin and one-time items that boosted profits.

Exxon’s Permian output almost doubled, helping output climb the most in more than six years. The company’s third positive profit surprise in a year could signal that Chief Executive Officer Darren Woods’ turnaround plan is back on track after its refineries lost the equivalent of almost $3 million a day during the first three months of the year.

Challenges remain: on a year-on-year basis, Exxon’s net income was down 21%, and excluding $500 million from a tax cut in Alberta, the per-share result was a nickel short of the consensus estimate.

Chevron’s bottom line was boosted by $740 million from a termination fee stemming from its aborted takeover of Anadarko Petroleum Corp. The San Ramon, California-based company earned $2.27 a share, 51 cents above the average estimate. But that margin shrank to a 3-cent beat when the breakup fee and its own Alberta tax gain were subtracted.

Exxon, Chevron Beat Expectations Thanks to Permian Oil Surge

After starting the trading session higher, Exxon and Chevron fell alongside the broader U.S. equity markets. Exxon dropped $1.04 to $71.42 at 10:56 a.m. in New York. Chevron declined $2.26 to $118.48.

North America’s two largest oil explorers joined BP Plc in posting earnings that exceeded estimates in what has been a mixed bag for energy earnings. Royal Dutch Shell Plc, Total SA, Eni SpA and Equinor ASA all reported results below analysts’ expectations. Although refining remained challenged compared to the same quarter in 2018, BP and its American competitors offset the slowdown with strong crude and gas production.

For Irving, Texas-based Exxon, output was led by a surge from shale wells in the Permian, one of the five cornerstone regions of CEO Woods’ long-term growth plan. The company was helped by the Alberta government’s decision to reduce the provincial tax rate. Exxon’s second-quarter earnings per share came in at 73 cents, exceeding the 66-cent average of 18 estimates.

Exxon, Chevron Beat Expectations Thanks to Permian Oil Surge

Exxon and Chevron’s Permian expansions come as smaller explorers are vying with drilling mistakes and funding hurdles. Concho Resources Inc., one of the Permian’s premier operators and perennial target of takeover speculation, was forced to slow activity after drilling almost two dozen wells too closely together. Concho was punished by investors: the stock fell the most in more than a decade on Thursday.

Exxon’s Woods had been focusing his turnaround on oil and gas production by expanding Permian drilling and exploring offshore Guyana to arrest stagnating output in recent years. That turnaround comes at a cost, with Exxon preferring to pump cash into new projects rather than buy back shares like Shell and Chevron.

The company said again that share buybacks are a lower priority than capital spending and continuing to increase the dividend.

--With assistance from Kevin Crowley.

To contact the reporters on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net;Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Christine Buurma

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