Falling oil prices hardly seem to be bothering the two biggest U.S. oil companies, but things could get tougher in the coming months. The Associated Press reports Exxon and Chevron leaned on strong performances from their refining operations to increase profits in the third quarter despite plummeting global oil prices.
“These companies can hold up in weaker markets,” says Brian Youngberg, an analyst at Edward Jones, about Exxon and Chevron. “Refining and chemicals can benefit from lower oil prices.”
The global price of oil fell 18% from the beginning of the quarter to the end, and it cost both companies. Revenue slipped at Exxon by 4% and at Chevron by 8%.
But low oil and natural gas prices make for low raw material costs—and higher profit—for refining and chemical operations, which turn oil and gas into fuels and chemicals. Profit at Exxon’s refining and chemicals operations rose 38% compared with a year earlier, and Chevron’s profit from its so-called downstream operations more than tripled.
Those results helped Exxon’s overall earnings rise 3% in the quarter to $8.07 billion. Chevron’s earnings rose 13% to $5.59 billion.
The trend lately has been for integrated oil and gas companies, which own production, refining and distribution assets, to spin off their refining operations into different companies in an effort to better appeal to investors. ConocoPhillips, Marathon and Hess have all exited refining in recent years. Read the full story.
