Exxon Mobil Corp. reported its highest profit since 2008 as Russia’s war in Ukraine threw global commodity markets into disarray.
Exxon’s announcement that first-quarter earnings could reach nearly $11 billion bodes well for the oil industry as trade sanctions, shipping disruptions, and surging demand strain supply lines.
However, the windfall is not without risk. Key Democrats in the United States House of Representatives demanded that Exxon and peers Chevron Corp., Shell Plc, and BP Plc immediately suspend dividends and share buybacks until the war is over, and chastised them for “profiteering off the Ukrainian crisis.”
Political leaders are under pressure to reduce skyrocketing energy prices and the threat of shortages. Last week, US Vice President Joe Biden pleaded with the industry to reinvest profits in new wells to help fill the supply gap created by the boycott of Russian crude. Simultaneously, he warned of harsh financial penalties for companies that delay projects involving federally owned oil prospects.
According to a letter signed by House Oversight Committee Chair Carolyn B. Maloney and Environment Subcommittee Chair Ro Khanna, the lawmakers chastised Exxon and the other three oil explorers for spending $44 billion on buybacks and payouts last year and planning to spend another $32 billion in 2022.
Exxon “is charging outrageous gas prices while making record profits,” Massachusetts Democrat Senator Ed Markey said in a Facebook post. “We should tax Big Oil’s windfall profits and redistribute the proceeds to this country’s working people.”
According to a filing, Exxon said Monday that first-quarter earnings could have been up to $2 billion higher than earnings in the final three months of 2021 when the company earned $8.8 billion.
The main driver was rising oil prices, with natural gas and wider refining margins also playing a role. During the third quarter, international crude futures reached a 14-year high of nearly $140 per barrel.
Separately, after receiving government and regulatory approvals, Exxon formally approved the $10 billion Yellowtail development off the coast of Guyana. The project is the fourth and largest in the Stabroek Block and it is expected to begin pumping approximately 250,000 barrels per day in 2025.
Exxon also revealed that exiting the Sakhalin-1 oil development in Russia’s the Far East could result in a $4 billion writedown. The company recently announced its intention to leave Russia due to international sanctions and what Chief Executive Officer Darren Woods described as the country’s “needless destruction” in Ukraine.
At 2:57 p.m. in New York, Exxon shares were little changed at $82.99.