Exxon’s Rising Production Drives Earnings Beat Despite Oil Slide

Exxon Mobil Corp. beat earnings estimates as strong production growth cushioned the drop in oil prices and refining margins, easing investor concerns about an increase in capital spending. 

Adjusted fourth-quarter earnings of $1.67 a share exceeded the consensus forecast by 12 cents. The beat comes just weeks after many analysts lowered expectations based on weaker-than-expected performance figures. European rival Shell Plc’s disclosed  that was well below forecasts on Thursday. 

Exxon surprised investors last month by raising capital spending to more than $30 billion annually over the next five years as Chief Executive Officer Darren Woods expands production to levels not seen since the 1970s. 

Woods has argued that new oil projects in Guyana and the Permian Basin, along with liquefied natural gas investments, have such high margins that they will drive Exxon’s breakeven oil price down to just $30 a barrel by the end of the decade, ensuring profitability however the energy transition pans out. 

The international Brent crude benchmark averaged roughly $74 a barrel during the fourth quarter, down 11% from a year earlier. The slide pressured the biggest oil companies’ capacity to fund shareholder-friendly outlays such as dividends. 

Exxon generated $36 billion of free cash in 2024 and handed nearly all of it to shareholders in the form of buybacks and dividends, making it the sixth highest cash distributor in the S&P 500 Index. The company intends to buy back $20 billion of shares annually through 2026.

“We’re seeing higher and higher production but that production is coming at lower cost of supply, higher profit barrels,” Chief Financial Officer Kathy Mikells said in an interview. “It’s important to remember that all barrels are not created equal and ours are very advantaged.”

Exxon posted net income excluding certain items of $7.4 billion, according to a release Friday, down from almost $10 billion a year earlier. 

Boosted by fast-growing projects in Guyana and the Permian, Exxon has been Big Oil’s standout performer over the past four years as commodity prices rebounded in the post-pandemic era and rivals Shell and BP Plc invested heavily in low-carbon ventures. 

But Woods is now entering a new phase of growth that requires a significant increase in spending. 

Gas-export projects in Qatar and Texas are expected to begin operations this year while Exxon also plans to increase crude output in places such as the Permian Basin, where it recently completed the $60 billion purchase of Pioneer Natural Resources Co. The company also is expecting to formally greenlight LNG developments in Papua New Guinea and Mozambique this year and next while a project to build the world’s largest clean hydrogen facility is also under consideration. 

By contrast, Chevron Corp. is  capital spending for the first time since 2021 as it prioritizes free cash flow, which will be used for buybacks and dividends.