While the OPEC+ group is trying to manage oil supply to the market, the world’s largest international oil companies are raising their production, with the U.S. supermajors hitting record highs.
Most companies referred to as Big Oil – ExxonMobil, Chevron, Shell, BP, and TotalEnergies – reported last week growing oil and gas production for the third quarter from a year earlier, as they look to grow advantaged lower-cost assets to deliver the energy the world needs. In addition, the European majors have scaled back their renewables ambitions and pivoted back to their core business of oil and gas.
Rising hydrocarbon output helped most of these post better-than-expected Q3 earnings despite the lower oil and gas prices compared to last year and the global weakness in the downstream with plunging refining margins.
As Big Oil has been boosting production, it has been adding to global supply and frustrating OPEC+’s efforts to control oil output and, consequently, oil prices. Higher production from non-OPEC+ sources has added to concerns about global oil demand growth to weigh on oil prices in recent months.
On Sunday, OPEC+ announced it would delay the planned start to the easing of the alliance’s production cuts from December 1, 2024, to January 1, 2025.
The group’s decision wasn’t too surprising, considering that it had conditioned a December supply boost of 180,000 barrels per day (bpd) on ‘market conditions’. A month before OPEC+ was due to begin reversing the production cuts, it apparently decided that market conditions were not supportive of adding supply.
Global oil demand growth has been weaker than OPEC expected earlier this year, the cartel has acknowledged. At the same time, non-OPEC+ supply has been rising, especially from the United States, Guyana, and Brazil—places where Big Oil is focused on developing advantaged assets.
Big Oil Boosts Production
Production gains for the biggest U.S. and European oil companies helped offset lower price realizations and weak refining. The American supermajors are pumping record volumes from the Permian, which helped them beat analyst estimates for the third quarter.On Friday, Exxon reported Q3 earnings above expectations as its liquids production hit a 40-year high, offsetting lower oil and gas realizations and weak refining margins. The earnings were driven by higher oil and gas production, including strong production growth from Guyana and Permian assets, including Pioneer assets in the first full quarter of Pioneer integration following the merger. Exxon said it saw its highest liquid volumes in 40 years in Q3 2024. Output jumped by 24% year-over-year to 4.6 million oil-equivalent barrels per day.
“We had a third-quarter production record in the Permian of over 1.4 million oil-equivalent barrels,” Kathryn Mikells, ExxonMobil’s chief financial officer, said on the earnings call.
Moreover, efficiency gains and advanced technologies have helped Exxon to double its profit per oil equivalent barrel on a constant price basis, from 2019 unit earnings of $5 per oil-equivalent barrel to $10 per barrel year-to-date in 2024, excluding Pioneer, Mikells added.
Chevron, the other U.S. supermajor, also reported last week consensus-beating earnings for the third quarter, driven by a record quarterly U.S. production and Permian oil and gas output.
Chevron’s total worldwide net oil-equivalent production rose by 7% from a year ago, primarily due to record production in the Permian Basin and the acquisition and integration of PDC Energy.
U.S. net oil-equivalent production jumped by 198,000 barrels per day (bpd) from a year earlier and set a new quarterly record, thanks to record high production in the Permian Basin and the acquisition of PDC, Chevron said.
The company’s executives noted on the earnings call that its annual capital expenditure (capex) is now less than half compared to a decade ago—at about $18 billion, down from $40 billion.
“We're doing it in a much more capital-efficient manner than we ever have before,” chief executive Mike Wirth said.
In an interview with Bloomberg, Wirth said, “We’re getting more efficient in everything we’re doing,” and “We’re getting more for every dollar we spend.”
The U.S. Big Oil grabbed headlines with record production numbers in Q3, but Europe’s majors – except TotalEnergies – also boosted oil and gas production.
Shell raised liquids and LNG production, and amid lower crude oil prices and refining margins in Q3, its consensus-beating earnings “reflect strong operational performance in Integrated Gas, Upstream and Marketing,” the supermajor said.
On the earnings call, CEO Wael Sawan said, commenting on Shell’s focus on its core business, “We start from the perspective of believing that oil and gas have a critical role in the energy transition for a long time to come.”
The other UK-based supermajor, BP, also booked third-quarter earnings above analyst expectations, although the profit was lower from a year earlier and the second quarter amid weaker oil prices and low refining margins. Year-to-date, BP’s upstream production was up by around 3%, including liquids production rising by 5%.
“We have made significant progress since we laid out our six priorities earlier this year to make bp simpler, more focused and higher value. In oil and gas, we see the potential to grow through the decade with a focus on value over volume,” CEO Murray Auchincloss said.
The supermajors are now looking to boost lower-cost, lower-emission production, potentially helping wreck OPEC+’s supply-management policies.
By Tsvetana Paraskova for Oilprice.com
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