Will Chevron Outperform ExxonMobil in Q2?


Jul. 22 2019, Published 11:22 a.m. ET

Chevron (CVX) and ExxonMobil (XOM) are scheduled to post their second-quarter earnings results on August 2. Let’s evaluate which of these mega-integrated energy companies could post a better performance in its upcoming results.

We’ll begin by reviewing Chevron’s and ExxonMobil’s first-quarter results. Chevron’s and ExxonMobil’s revenues of $35.2 billion and $63.6 billion, respectively, missed Wall Street analysts’ estimates by 8% and 2% in the quarter. While Chevron’s adjusted EPS of $1.39 beat analysts’ estimate, ExxonMobil’s EPS of $0.55 missed their estimate. In the quarter, Chevron’s and ExxonMobil’s earnings fell 27% YoY (year-over-year) and 50% YoY, respectively.

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Chevron’s and ExxonMobil’s estimates

In the second quarter, analysts expect both companies’ earnings to be dull.

Wall Street analysts expect Chevron’s EPS to rise 2% YoY to $1.82 in the second quarter. Analysts also expect Chevron’s second-quarter EPS to rise 31% sequentially. However, they expect its revenue to fall 4% YoY to $40.5 billion in the second quarter.

Analysts expect ExxonMobil’s EPS to fall 19% YoY to $0.75 in the second quarter. However, they expect ExxonMobil’s EPS to rise 36% sequentially. Further, they expect ExxonMobil’s revenue to fall 10% YoY to $66.1 billion in the second quarter.

The comparison

In the second quarter, analysts expect Chevron’s earnings to rise and ExxonMobil’s earnings to fall YoY. The differences in expectations could be the result of the companies’ upstream volume growth. Chevron’s upstream production has risen to new highs in the past couple of quarters. In contrast, ExxonMobil’s upstream portfolio is skewed for long-term growth.

Narrower oil spreads could affect ExxonMobil’s downstream earnings in the second quarter. However, wider cracks could partly offset the impact of these narrower spreads.

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Peer comparison

Analysts expect Royal Dutch Shell’s (RDS.A) and Suncor’s EPS to rise 10% YoY and 23% YoY, respectively, in the second quarter. However, they expect BP’s (BP), Total’s, and Petrobras’s EPS to fall 7% YoY, 15% YoY, and 11% YoY, respectively, in the quarter.

Oil prices in the second quarter

Oil prices fell about 3% in the second quarter. Brent prices fell 10% YoY to $69 per barrel in the period. Similarly, WTI prices plunged 12% YoY to $60 per barrel in the quarter. Lower oil prices likely affected Chevron’s and ExxonMobil’s upstream realizations in the period.

To learn more about oil’s price outlook, read IEA: Don’t Expect Oil Prices To Go Much Higher.

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Chevron’s upstream volumes

Chevron’s upstream earnings could benefit from higher hydrocarbon production, partly offsetting the impact of lower realizations. Chevron expects its production to grow between 4% and 7% in 2019. The company expects the Permian, Wheatstone, and Gorgon regions to be its upstream growth drivers.

In the first quarter, Chevron’s production grew 7% YoY to 3.04 MMboepd (million barrels of oil equivalent per day) due to larger volumes at Wheatstone and the Permian Basin. Chevron expects its production ramp-up to continue throughout the year.

ExxonMobil’s volumes

In the second quarter, according to ExxonMobil’s guidance, its gas volumes could fall due to seasonal demand. In the first quarter, the company’s natural gas volumes fell 1.1% driven by lower international volumes affected by natural declines, divestments, and lower demand. However, ExxonMobil’s total upstream volumes rose 2% YoY to 3.98 MMboepd in the first quarter. Higher liquids production from the Permian Basin drove ExxonMobil’s volume growth.

In the first quarter, BP’s hydrocarbon production rose 2% to 2.66 MMboepd, but Shell’s output fell 2% YoY to 3.75 MMboepd.

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Chevron’s and ExxonMobil’s downstream earnings

Chevron’s and ExxonMobil’s downstream earnings could be unstable in the second quarter due to mixed refining environment cues. While refining cracks rose in the second quarter, oil spreads fell. The US Gulf Coast WTI 3-2-1, the industry crack, rose 9% YoY to $20 in the quarter. However, lower spreads could partly offset the effects of the higher refining crack. The Canadian differential and the Midland spread fell 30% YoY and 71% YoY to $12 per barrel and $2 per barrel, respectively, in the second quarter.

Oil spreads affect ExxonMobil’s and Chevron’s refining margins and earnings. In the first quarter, lower industry fuel margins and narrower North American oil spreads affected ExxonMobil’s margins. The same could continue for ExxonMobil in the second quarter. ExxonMobil expects more turnaround activities in the downstream segment in the period.

In the first quarter, Chevron saw lower margins and throughput domestically and internationally. Chevron’s throughput fell 7% YoY domestically due to adverse weather conditions at its El Segundo and Richmond refineries. Its throughputs fell 6% YoY internationally due to the sale of its Cape Town refinery.

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Analysts’ recommendations

Pre-earnings, more Wall Street analysts have favorable opinions on Chevron than ExxonMobil. Of the analysts that cover these stocks, 74% rate Chevron as a “buy,” and 23% rate ExxonMobil as a “buy.”

More analysts favor Chevron perhaps due to its upstream volume growth, lower valuation, and better liquidity position compared to ExxonMobil.

Chevron’s upstream volumes are on a high growth trajectory. The company expects its key assets in Australia and the US to propel its hydrocarbon production growth. Chevron expects its production in the Permian Basin to grow to about 0.9 MMboepd by 2023. In the first quarter, CVX’s Permian production rose 55% YoY to 0.4 MMboepd. Gorgon and Wheatstone are also ramping up their productions. The company also expects its other upstream assets, such as its deep-water assets in the Gulf of Mexico and its conventional oil and gas assets in Kazakhstan, to add to its production growth.

ExxonMobil has a vast upstream asset base, which is skewed for long-term growth. The company is investing in assets at a time of lower costs and high labor availability, which improves its future growth prospects. However, in 2019, Chevron’s hydrocarbon production growth could outperform ExxonMobil’s growth.

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Liquidity and valuations

Chevron had a better liquidity position than ExxonMobil in the first quarter. Though both companies had cash flow shortfalls, Chevron’s shortfall of 3% was lower ExxonMobil’s 4% shortfall.

On the valuation front, Chevron is trading a bit lower than ExxonMobil. Chevron stock currently trades at a 15.8x forward PE, whereas ExxonMobil trades at a 17.0x forward PE.


Analysts expect Chevron to outperform ExxonMobil in terms of YoY earnings growth in the second quarter. While analysts expect Chevron’s EPS to rise 2% YoY, they expect ExxonMobil’s EPS to fall 19% YoY. Chevron expects higher volumes in the second quarter, which could support its earnings.


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