Exxon Mobil and Chevron Q2 Earnings: Energy Giants May Take a Hit

They face a volatile energy market, weak refining margins and low natural gas prices

• Exxon Mobil and Chevron are scheduled to report earnings this week.
• Weak refining margins and low natural gas prices are creating a headwind to second-quarter earnings.
• Traders may opt to take directional bets on both companies amid low implied volatility in the stocks.

Earnings season is here, and oil giants Exxon Mobil (XOM) and Chevron (CVX) are scheduled to report earnings this week. The results will cap off a week filled with technology earnings as the S&P 500 points to its third weekly loss.

Oil companies are struggling to increase net income as shareholder expectations rise, pushing U.S. oil producers to focus on core business operations while turning away from future projects focused on reducing carbon reliance.

Exxon Mobil earnings preview: What to expect

Exxon will report its second-quarter 2024 fiscal results Friday at 5:30 a.m. CDT. A conference call with CEO Darren Woods and Chief Financial Officer (CFO) Kathy Mikells will go over the results at 7:30 a.m. CDT.

According to Yahoo Finance, analysts expect earnings per share (EPS) of $2.01 on $91 billion in revenue. That would be up from last year’s EPS of $1.94 on $82.9 billion in revenue. Exxon missed EPS estimates in three of its last four quarterly earnings, as a volatile energy market made it harder to forecast profits.

Exxon estimated production would double to 1.3 million barrels of oil equivalent per day (MOEBD) from the Pioneer Natural Resources acquisition, completed in early May, adding 500,000 to 550,000 barrels of oil equivalent per day. However, the full impact won’t be evident until the third quarter. The acquisition was finalized May 3.

Despite higher production, Exxon warned earlier this month that weak refining margins and low natural gas prices would drag on its profits in Q2. The oil giant said refining earnings will fall to $1.1 billion to $1.5 billion in Q2 compared to the previous three months. The losses from refining will likely offset higher crude oil prices.

The 3-2-1 crack spread—a market gauge to predict refining margins—averaged $27.61 from April to June, down from a high of $35.55 in February. Natural gas prices fell as low as $1.58 per million British thermal units (mmBtu) during the reporting period, although they did rise over $3 per mmBtu in June before falling back toward $2 per mmBtu.

Investors are keen to hear details on the timeline for completing the Golden Pass liquified natural gas export terminal in Texas, in which Exxon controls a 30% stake, after the contractor Zachry Holdings filed for bankruptcy back in May. Current expectations put the completion of the terminal sometime in 2025.

Trading Exxon earnings

XOM traded with an implied volatility rank (IVR) of 49.1 at the end of July, indicating that implied volatility is about average compared to the previous twelve months of trading. The August 9 option expiration puts the implied move at +/- 3.69 points, or 3.12% of the 118 stock price on July 30.

The stock is up about 18% since the start of the year but remains nearly 5% off its April 2024 high. XOM is trading above its 20-, 50- and 200-day simple moving averages (SMAs) after a strong second-half of trading in July.

The low volatility in XOM’s options may attract directional strategies that include buying a call or put, based on an investor’s bias. The Aug. 16 expiration shows that traders are concentrated in the 110 put, which signals that investors are betting on a weak post-earnings reaction.

Chevron earnings preview: What to expect

Chevron will report its second-quarter 2024 results on Friday, before the market open. A conference call with CEO Mike Wirth and Chief Financial Officer (CFO) Eimear Bonner will start at 11:00 a.m. EDT.

Analysts expect CVX to report EPS of $2.93 on $50.8 billion in revenue for the three months ending June 30. The company beat estimates in three of the last four quarters. Chevron posted EPS of $3.08 in Q2’ 2023 on $48.9 billion in revenue.

Investors are keen to hear how Chevron is dealing with the latest blow to its $53 billion acquisition of Hess (HES), which was announced last year. Exxon is challenging the merger, arguing that Hess should have provided a chance for Exxon to purchase its stake in offshore Guyana—the world’s largest oil find of the last 20 years. Chevron and Hess are hoping for a favorable outcome in the third quarter as it moves through arbitration.

Trading Chevron earnings

CVX offers a bit more volatility than XOM, with an IVR of 63.7, indicating that volatility is elevated compared to the prior 12 months. However, options show an expected move of +/- 4.46 points, or only 2.80% of today’s 118 stock price, based on the Aug. 9 expiration.

The stock is up 6.5% since the start of the year but about 5% off its April high of 167.11. Like XOM, CVX is trading above its key SMAs. Most of the open interest in the Aug. 16 expiration is concentrated in the 170 call, which hints that active investors are betting on a strong post-earnings reaction. Low premiums in the options may persuade investors to take outright bets on a direction by using calls or puts.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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