Exxon and Chevron, Rivals Turned Frenemies, Face Profit Pressure-Cooker

Image of oil drills. — Photo via Christopher Boswell/Newscom

America’s two largest oil companies, Exxon Mobil and Chevron, will report earnings before the bell this morning, and analysts expect profits at both to come up a few barrels short. They may, in fact, be the worst since 2021, when the pandemic converted a big share of human behavior requiring energy consumption into pajama-clad work-from-home days at the kitchen table.

Rather than jockeying for an advantage in their weakened state, the two longtime rivals are set to work together more and more on major exploration initiatives following a tense legal standoff earlier this year that has practically made them frenemies.

Oil, like blood, runs thicker than water and, also like blood, Exxon-Chevron’s rivalry can be traced back to the same family. The two companies are a product of the Supreme Court’s 1911 breakup of industry titan John D. Rockefeller’s Standard Oil, which justices ordered split up into 34 different entities at the height of the trust-busting Progressive Era.

As rivals, they also feel the same pain. In the second quarter, that came from the oil-exporting OPEC+ group of countries, which decided to sharply increase production in July — something they’ve agreed to continue this month. This helped push oil prices to four-year lows for large stretches of the three months from April to the end of June. Hence Wall Street’s consensus projection, compiled from analysts by data provider LSEG, that Exxon will report $6.7 billion in adjusted earnings for the quarter, down roughly a quarter year-over-year, and Chevron $3 billion, down roughly a third. Exxon, for one, already warned last month that it expects to take a $1.5 billion earnings hit in the quarter because of lower oil and gas prices. But, with both firms set to report a downbeat quarter, Chevron has moved its business into its best position in years, and Exxon is going to be forced to play along:

Two weeks ago, in a massive boost to its future production and cash flow, Chevron closed its $53 billion acquisition of Hess after beating Exxon in arbitration. The deal means it will take over Hess’s 30% stake in a massive Guyana project — with some $1 trillion in reserves and a lucrative $30 per barrel break-even price — that’s operated by Exxon, which unsuccessfully argued it had the right to buy out its rival.
But the situationship doesn’t end there. Last month, the two firms also led a $34 billion memorandum of understanding with Indonesia to work with the country’s state-run Pertamina to boost production and increase technology exchanges between the archipelago nation and US oil majors.