Exxon Mobil’s net income is in the black
Toronto area residents got a nice surprise last Saturday as prices at the pump fell 11 cents at most gas stations. While the few dollars saved were enough to pay for a couple cups of joe, the costs of operating a motor vehicle end up benefitting oil and gas companies in the long run.
In its third-quarter fiscal 2021 results, Exxon Mobil reported revenues of $74 billion (U.S.), from $46 billion the prior year. While total costs and other deductions increased to $64 billion, from $47 billion the prior year, the company reported net income of $6.8 billion, up from a net loss of $680 million in 2020.
Darren Woods, CEO, was pleased with the results, but also acknowledged the importance of investing in lower-carbon opportunities. “We expect to increase the level of spend in lower-emission energy solutions by four times over the prior plan,” he said.
Werner Antweiler, professor of economics at the Sauder School of Business at the University of British Columbia, is an energy and environmental economist. Antweiler’s recent research focuses on the electrification of mobility in B.C., specifically, the challenges surrounding the accessibility of charging stations for electric vehicles and how to prepare the electrical grid for increased consumption.
When it comes to global demand for oil, Antweiler notes there are two major forces competing against each other. “On one hand, we have population and economic growth which requires more energy, but at the same time we want to reduce our energy and carbon footprint, which means we have to be more efficient.”
“These two forces will be competing against each other and it will lead to a plateau in fossil fuel consumption before it starts decreasing once more vehicles are electrified,” he said, noting that technology determines demand for oil as the shift to electrification reduces reliance on non-renewable energy sources.
Chevron’s top line increases 83 per cent
Chevron and Exxon Mobil are both successor companies of Standard Oil, a now defunct oil behemoth co-founded by members of the Rockefeller family, among others. Standard Oil was dissolved into 34 entities in 1911 after the Supreme Court ruled that it violated antitrust laws.
In its third-quarter fiscal 2021 results, Chevron reported total revenues of $45 billion, up from $24 billion in 2020. Overall net income for the quarter was $6.1 billion, up from a $207 million loss the prior year, largely driven by the growth in the top line.
Mike Wirth, CEO, noted that the strong third-quarter results were driven by improved market conditions, strong operational performance and a lower cost structure. Wirth added that the company “paid dividends of $2.6 billion, reduced debt by $5.6 billion, and repurchased $625 million of shares during the quarter.”
With companies such as Lucid Motors, Rivian and Tesla all vying for a slice of the fully electric car market, investors may be wondering if traditional car brands will follow suit. “What we see is that car manufacturers are embracing electric vehicles. We have reached a turning point that has become clear in the announcements made by major manufacturers. It is no longer Tesla or other companies that are trying to fill a niche, it is the major carmakers who are driving (the electrification of vehicles),” Antweiler said.
While electric vehicles have been on the roads for many years in developed countries, Antweiler acknowledges that not all countries advance at the same pace. “What we see in some jurisdictions that don’t have carbon pricing and (carbon-conscious) government policies, is that internal combustion engines will still prevail for some time. When cost is an essential factor, internal combustion engines may be the cheaper option in those jurisdictions,” he said.
Bottom line
With a top-line growth of 83 per cent, compared to 60 per cent for Exxon Mobil, coupled with a net profit margin of 14 per cent, versus nine per cent for Exxon, Chevron finished its third quarter on a high note. While the electrification of vehicles is a threat to both companies, the high costs and the lack of government incentives in some countries make fossil fuel vehicles the economical choice for now. Consumers may benefit from the occasional drop in oil prices, but oil and gas companies are the real winners. Exxon and Chevron both get the thumbs-up this week.
JOIN THE CONVERSATION
Anyone can read Conversations, but to contribute, you should be registered Torstar account holder. If you do not yet have a Torstar account, you can create one now (it is free)
https://www.thestar.com/business/opinion/2021/12/04/the-faceoff-with-exxon-mobil-and-chevron-both-reporting-a-return-to-net-income-in-the-black-the-rival-oil-and-gas-companies-both-get-a-thumbs-up-this-week.html
2021-12-04 10:22:38Z
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
Bagikan Berita Ini
0 Response to "The Faceoff: With Exxon Mobil and Chevron both reporting a return to net income in the black, the rival oil and gas companies both get a thumbs-up this week - Toronto Star"
Post a Comment