WSJ What’s News - What’s News in Earnings: Oil Companies See Mixed Fortunes Under Trump

Episode Date: February 19, 2025

Bonus Episode for Feb. 19. President Trump wants to slash regulations to help big energy companies. But he also wants to see the price of crude oil fall, an unwelcome prospect for companies such as Exxon and Chevron . In their latest quarterly earnings reports oil giants watched their annual profits dip as a result of anemic natural-gas prices and slimmer margins in their refining operations. Now, many are trying to prepare for far less favorable market conditions and more strategy shifts ahead.  Chip Cutter hosts this special bonus episode of What's News in Earnings, where we dig into companies’ earnings reports and analyst calls to find out what’s going on under the hood of the American economy. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Chip Cutter for The Wall Street Journal, and this is What's News in Earnings, our look at the broad themes that stood out in the latest earnings season. Today we're focusing on the energy industry. Oil giants have already watched their annual profits dip as a result of low natural gas prices and lower margins in their oil refining businesses, and now many are trying to prepare for far less favorable market conditions ahead, with some big strategy shifts coming too. President Trump is looking to slash regulations to help big energy companies, but he also wants to see the price of crude oil fall, an unwelcome prospect for companies such as

Exxon and Chevron. How are they responding? Colin Eaton writes about the largest oil companies and global energy issues in the Wall Street Journal's Houston Bureau. He joins us now. Hi, Colin. Hi, Chip. Colin, you've been sifting through the earnings reports of big oil companies like Exxon, Chevron,

and others over the past few weeks. What's the biggest trend that jumps out at you? So if you take a look at just the top 10 US oil and gas companies from Chevron and Exxon down to Devin Collectively, they brought in about 17.5 billion dollars in net income in the fourth quarter It sounds like a lot of money and it is but actually it's the lowest amount of money. They've earned altogether since late 2021 now they had been riding high for about three years. Three years ago, you recall Russia invaded Ukraine, energy prices went through the roof.

Post COVID oil demand started to shoot up. Oil companies started making money again and they started to shell out record sums of money to shareholders via dividends and stock buybacks. Fast forward to where we are now, oil and gas prices have come back down to earth. Their earnings have followed. Natural gas prices have been pretty weak.

Refinery margins have tightened a lot since gasoline prices were at a record $5 a gallon nationally in the summer of 2022. So all of that weighs on earnings for companies like Axon and Chevron. Those two companies, I want to mention in particular, are still trying to pump as much cash as they can to shareholders. Last year they sent shareholders $63 billion combined in share buybacks and dividends. That's because they're in competition

for investors not only with each other, but the broader S&P 500, which has shifted a lot of weight to big tech companies in recent years. Given all of this, it seems like many of the biggest oil companies including Chevron and BP are now in cost cutting mode. I mean, Chevron recently said it would cut up to 20% of its jobs. What's behind some of those moves? The companies are looking to just trim as much as they can in response to what could be a more challenging year or two.

President Trump wants to bring oil prices down. He's meeting with Saudi Arabia and Russia this week, and the expectation is that they're pushing for an end result that could put more oil on the market. There's not a whole lot of room in the market right now for more oil. That could put further pressure on oil and gas company earnings. So companies are cutting costs, Chevron cutting some 8,000 workers. I mean, it's part of the expectation that their costs have to come down if they're going to keep putting out as much money to shareholders as they have been.

Yeah. And I saw that ConocoPhillips said it was gonna be even more aggressive with dividends and share buybacks, but that its earnings were down from $3 billion a year ago to about 2.1 billion. And it's interesting, you mentioned President Trump, he's got this reputation for being a friend of big oil. There's the whole drill baby drill, right? But it seems like his policies

are a mixed bag for oil companies. From this quarter's earnings reports an investor calls What are oil executives saying they're paying attention to most from Trump? President Trump in his first week in office issued a lot of executive orders aimed at cutting regulations for oil companies And he said he wants to unleash American oil export more oil and natural gas abroad and export more oil and natural gas abroad, and streamline the permitting process for these companies. But a lot of his policies, like tariffs on Canadian crude, for example,

the oil industry sees those as a threat to their bottom line. If tariffs on Canadian crude had gone through or go through sometime this year, then refiners may have to ultimately cut back on the amount of fuel they produce, which could raise prices at the pump. The oil and gas companies see foreign policy as very important because the Trump administration

has said that they're going to put maximum pressure on Iran, which could raise prices. But he also wants OPEC to be a counterweight to that, to put more oil on the market so that oil prices go down. And if that happens, that's more pressure on their earnings. So many big energy companies seem to be shaking up their longer-term strategies. You've been covering some of this and I wonder, how are oil giants adjusting their approaches for the future, given all of these factors that we're talking about here. Oil companies are looking to keep investments relatively flat in the U.S. That means that oil production probably isn't going to go much higher than it is currently,

which is not exactly what President Trump had hoped for. They're in this capital discipline mode where investors want to see them return as much cash as they can To shareholders rather than pursue growth So it's gonna be more the same and they're sort of writing oil and gas prices at this point They're waiting to see how the market shapes out before they make any big investments Finally climate change remains a threat. So how are companies prioritizing renewable sources of energy? Is there a real focus or have the biggest companies largely de-emphasize such projects? The oil companies are still working on developing projects hydrogen and carbon

capture. Some of the newest initiatives they're looking at building natural gas power plants to meet the demand for AI. These would be natural gas-fired power plants with the ability to capture the carbon that is emitted from their operations. So they're still looking at a number of ways to invest in cleaner tech, lower carbon technologies. But it does seem like the pressure from ESG related investors has eased up in the past year or two. And companies are certainly emphasizing that they are oil companies first. And that's where they plan to make their money for the next 30 years.

Colin Eaton writes about the largest American oil companies and global energy issues in the Wall Street Journal's Houston Bureau. Colin, thanks for being here. Thanks so much, Chip. And that was What's News and Earnings. Today's show was produced by Zoe Culkin and Pierre Bienamé with supervising producer Michael Cosmides and deputy editor Chris Zinsley. Later today, we'll have the PM edition of What's News out for you as usual.

And we'll be back later this earnings season diving into another industry. Until then, I'm Chip Cutter. Have a great day.