Energy stocks have been a bright spot in an otherwise turbulent market, yet Wall Street is tempering expectations for the upcoming earnings releases from giants like Chevron and ExxonMobil. While oil prices have been on a generally upward trajectory, analysts point out that factors like depressed natural gas prices and lower refining margins are likely to impact the bottom line in the first quarter and may continue to present challenges throughout the year.
Despite recent mergers and acquisitions, the market is closely watching how these oil majors are adapting to changing market conditions.
The Numbers Breakdown
According to forecasts, Chevron could see an adjusted profit of $2.90 per share, a drop of nearly 18% from the same period last year. ExxonMobil’s anticipated earnings of $2.19 per share represent a 22% decline. These projections underscore the complex dynamics at play in the energy sector.
One of our analysts suggests that fluctuations in natural gas prices are a primary concern. With natural gas prices significantly lower year-over-year, the overall profitability picture becomes more complex. Natural gas is a common byproduct of oil production, and the current supply glut is creating downward pressure on prices for this significant revenue stream. Refining margins, while still healthy, have also retreated from their recent highs, potentially eroding earnings growth for integrated oil companies.
Uncertainties and Market Outlook
Most analysts expect oil prices to maintain some strength in the near term, potentially providing a counterbalance to these headwinds. The outlook for natural gas remains more muted, as the current oversupply will take time to resolve. The second quarter may see some upward momentum in earnings growth, but as oil pulls back later in the year, earnings could follow this downward trend.
Dealmaking in Focus
Beyond the financial results themselves, investors are eager for updates on strategic moves in the sector. The recent tug-of-war between ExxonMobil and Chevron over the acquisition of Hess, and its prime asset off the coast of Guyana, will be a hot topic as earnings calls highlight evolving strategies. ExxonMobil’s existing stake in the prolific region, combined with its right of first refusal in Hess’ potential sale, has added a layer of intrigue to the situation.
Additionally, ExxonMobil’s sizable acquisition of Pioneer Natural Resources underscores its commitment to expanding within the Permian Basin. These deals signal a willingness among large oil firms to consolidate and adapt to shifting energy landscapes.
Eyes on the Future
Hess’s recent strong earnings report, fueled by its Guyanese operations, bodes well for ExxonMobil’s future position in the region. Investors will be parsing the earnings calls for any hints about how the oil majors plan to navigate the evolving energy market, balance supply and demand factors, and maximize shareholder value in an environment increasingly focused on both traditional oil and emerging energy solutions.
