Energy Giants Beat Estimates Despite War-Driven Hedge Losses

U.S. energy majors Exxon Mobil and Chevron saw significant declines in first-quarter net income, primarily driven by unfavorable financial hedges following the outbreak of war in Iran. The conflict, triggered by U.S. and Israeli strikes on February 28, has caused the most severe oil supply disruption in history, sending prices up 57% and placing extreme stress on the global energy infrastructure. Exxon Mobil reported a net income of $4.2 billion, or $1.00 per share, a 45% decrease from $7.7 billion in the prior year. The company attributed the decline to a $4 billion timing loss on open hedges and a $700 million hit on closed hedges. Adjusted for these temporary items, earnings were $8.8 billion, or $2.09 per share. Chevron's net income fell 36% to $2.2 billion, or $1.11 per share, compared to $3.5 billion last year. The company recorded a $2.9 billion charge related to its financial hedges. However, adjusted earnings of $1.41 per share significantly beat the LSEG analyst estimate of 95 cents, marking the company's largest beat since October 2020. Despite the headline profit drops, shares for both companies rose in premarket trading. Chevron CEO Mike Wirth warned that the global energy system remains under extreme stress and indicated that oil prices will likely remain elevated until the Strait of Hormuz is reopened.