President Trump’s withdrawal from an international nuclear deal with Iran sparked dismay among U.S. allies this spring, but his strategy has proved a lucrative one for the shareholders who own oil companies such as ExxonMobil and Chevron.
On Friday, both producers credited higher crude prices, which began rising after the U.S. halted purchases from Iran and pressured other countries to do the same, as drivers of third-quarter earnings that topped Wall Street expectations by wide margins.
Chevron’s earnings of $2.39 a share outpaced the $2.06 average estimate from analysts surveyed by FactSet by 16 percent, while ExxonMobil’s profit of $1.46 a share topped projections by 20 percent. The climb in crude prices — which reached their highest level since 2014 this year — coupled with more expensive coal and natural gas may ultimately curb global economic growth, the International Energy Agency warned earlier this month.
Prices are rising because exports from Iran, the third-largest producer in the Organization of Petroleum Exporting Countries, have declined ahead of sanctions that Trump will fully reimpose beginning Monday. His administration says it will also penalize countries that buy oil from Iran, with a few exceptions, in order to cripple the Islamic Republic’s economy in retaliation for its nuclear program and interference with the U.S. agenda in the Middle East.
Iran’s exports have already fallen by 800,000 barrels per days since May, the IEA said. Oil volumes from Iran dripped to a two-and-a-half year low in September, with customers trimming purchases as U.S. sanctions drew nearer.
“We have worked closely with other countries to cut off Iranian oil exports as much as possible,” Secretary of State Mike Pompeo said in a news briefing on Friday, though he noted the administration’s efforts to keep oil prices stable.
“Not only is this good for American consumers and the world economy, it also ensures that Iran is not able to increase its revenue from oil as its exports plummet,” Pompeo said. Prices for brent crude, the benchmark for oil produced outside the U.S., climbed 5 percent to $81.72 in the three months through September.
During the same period, a $19-per-barrel uptick in prices boosted earnings in Irving, Texas-based Exxon’s exploration and production business alone by $2.6 billion, Neil Hansen, the head of investor relations, told analysts on an earnings call Friday. Companywide, net income climbed 57 percent to $6.24 billion.
At San Ramon, Calif.-based Chevron, net income more than doubled to $4.1 billion amid “higher production and crude oil prices,” Chief Executive Officer Michael Wirth said Friday. The oil giant garnered an average $62 per barrel of crude oil and natural gas liquids in the quarter, 48 percent higher than a year earlier.
Cash from operations “was the highest it has been in nearly five years, back when brent crude prices were averaging about $110 per barrel,” Chief Financial Officer Pat Yarrington told investors on an earnings call.
