Exxon Mobil, Chevron post surprise profit jump thanks to refining

The cheapest crude in 2 1/2 years has the world’s two biggest oil producers glad they held on to their refineries when rivals were shunning the business.

Exxon Mobil Corp. and Chevron Corp. surprised investors and analysts Friday with higher profits as slumping crude prices made it cheaper to manufacture gasoline, diesel and jet fuel. The results showed the benefit of the so-called integrated model pioneered by John D. Rockefeller in the late 19th century that combined oil fields with refineries to squeeze more value from each barrel, said Brian Youngberg, an analyst at Edward Jones in St. Louis.

“What we’re seeing is the integrated model providing outstanding earnings,” he said.

Exxon’s refineries made $1 million in profit every two hours during the third quarter — a 73% increase from a year earlier. Chevron more than tripled its profit from turning petroleum into fuels, helped by a U.S. refining network stretching from the Pacific Ocean to the Gulf Coast that processed enough crude during the quarter to fill 42 supertankers.

The refining business benefits from lower crude prices in a number of ways, said John Auers, vice president at Turner Mason & Co., a Dallas-based consulting firm. Refiners make some products, such as asphalt, that are insulated from oil price fluctuations. U.S. refiners are free to export their fuels to higher-paying foreign markets. Also, cheaper gasoline can encourage people to drive more.

For both companies, the refining boon more than made up for gloomy returns from oil and natural gas production as tumbling crude prices and faltering output dented profits from those businesses.

Exxon’s third-quarter net income was $8.07 billion, or $1.89 a share, increasing from $7.87 billion, or $1.79, a year earlier, the Irving, Texas-based company said. The per-share result was 18 cents more than the $1.71 average of analysts’ estimates compiled by Bloomberg.

For Chevron, profit rose to $5.59 billion, or $2.95 a share, from $4.95 billion, or $2.57, a year earlier, the San Ramon, Calif.-based company said. Excluding one-time gains and losses, the per-share result exceeded analyst estimates by 43 cents.

Exxon shares gained $2.26, or 2.4%, to $96.71. Chevron rose $2.75, or 2.4%, to $119.95.