WSJ What’s News

Episode: What’s News in Earnings: Oil Companies See Mixed Fortunes Under Trump
Release Date: February 19, 2025
Host: Chip Cutter
Reporter: Colin Eaton, Houston Bureau
Produced by: Zoe Culkin, Pierre Bienname, Michael Kosmides, Chris Zinsley

Introduction

In the February 19, 2025 episode of WSJ What’s News in Earnings, host Chip Cutter delves into the financial performance of major oil companies amidst a shifting political and economic landscape under President Trump’s administration. The discussion is enriched by insights from Colin Eaton, a seasoned reporter from the Wall Street Journal's Houston bureau, who analyzes the trends affecting oil giants like Exxon, Chevron, and ConocoPhillips.

Earnings Overview

Chip Cutter opens the discussion by highlighting the recent dip in annual profits among top oil companies. Colin Eaton elaborates on this trend, noting that “the top 10 US oil and gas companies... collectively brought in about $17.5 billion in net income in the fourth quarter” (01:18). While this figure appears substantial, Eaton clarifies that it represents “the lowest amount of money they’ve earned altogether since late 2021”. The decline is attributed to “low natural gas prices and lower margins in their oil refining businesses”, reversing a three-year period of heightened profits fueled by geopolitical tensions and post-pandemic demand surges.

Impact of Trump’s Policies

The episode explores the complex relationship between President Trump’s policies and the oil industry. Colin Eaton explains that Trump’s administration has implemented several measures aimed at benefiting oil companies, such as “cutting regulations, unleashing American oil, exporting more oil and natural gas abroad, and streamlining the permitting process” (04:08). However, these policies present a double-edged sword.

On one hand, deregulation and increased exports are designed to boost production and profitability. On the other, initiatives like “tariffs on Canadian crude” pose significant challenges. Eaton points out that such tariffs “could put more oil on the market”, thereby “pressuring oil and gas company earnings”. Additionally, Trump’s stance on OPEC seeks to “put more oil on the market so that oil prices go down”, which directly impacts the revenue streams of companies like Exxon and Chevron.

Cost-Cutting Measures

Facing declining earnings and anticipating tougher market conditions, major oil companies are implementing cost-cutting strategies. Chip Cutter references Chevron’s decision to cut up to 20% of its workforce, which Eaton explains as “trim as much as they can in response to what could be a more challenging year or two” (02:55). This includes significant layoffs, with Chevron alone reducing its workforce by 8,000 employees.

Moreover, companies are maintaining robust cash distribution to shareholders despite earnings downturns. For instance, Exxon and Chevron combined “sent shareholders $63 billion in share buybacks and dividends last year” (01:18). This aggressive return of capital is a strategic move to stay competitive not only among themselves but also against the broader S&P 500, which has seen increased weight from big tech firms.

Future Strategies and Investments

Looking ahead, oil companies are adopting a capital discipline approach, prioritizing shareholder returns over growth investments. Colin Eaton notes that these firms are “keeping investments relatively flat in the U.S.”, signaling “oil production probably isn't going to go much higher” than current levels. This cautious stance reflects uncertainty in the market and a wait-and-see approach regarding future oil and gas prices.

Furthermore, companies are bracing for potential increases in oil supply driven by international agreements and policy shifts. The anticipation of “more oil on the market” in the wake of Trump’s meetings with Saudi Arabia and Russia underscores the need for oil companies to manage costs meticulously to sustain shareholder payouts.

Focus on Renewable Energy

Despite the central focus on traditional oil and gas operations, the episode touches upon the oil industry's efforts to pivot towards cleaner energy sources. Eaton highlights ongoing investments in “hydrogen and carbon capture” technologies and the development of natural gas power plants designed to meet the rising demand for AI-driven applications (06:08). These initiatives aim to “invest in cleaner tech, lower carbon technologies”, aligning with broader environmental, social, and governance (ESG) criteria.

However, Eaton observes a slight shift in investor pressure, noting that “the pressure from ESG related investors has eased up in the past year or two”. Consequently, while oil companies are exploring renewable projects, they remain steadfast in their commitment to oil as the primary revenue driver for the foreseeable future, “the next 30 years”.

Conclusion

The episode concludes with a comprehensive overview of the multifaceted challenges and strategic adaptations within the oil industry under President Trump’s administration. Despite efforts to streamline operations and engage in shareholder-friendly practices, oil giants like Exxon, Chevron, and ConocoPhillips face a precarious balance between regulatory shifts, market pressures, and the slow transition towards renewable energy sources. As the industry navigates these turbulent times, the focus remains on maintaining financial stability while cautiously exploring avenues for sustainable growth.

Notable Quotes:

• Colin Eaton on earnings: “the lowest amount of money they’ve earned altogether since late 2021” (01:18).
• Colin Eaton on cost-cutting: “trim as much as they can in response to what could be a more challenging year or two” (02:55).
• Colin Eaton on shareholder payouts: “they are in competition for investors, not only with each other, but the broader S&P 500” (01:18).
• Colin Eaton on Trump's dual impact: “tariffs on Canadian crude... pressure on oil and gas company earnings” (04:08).
• Colin Eaton on renewable initiatives: “still looking at a number of ways to invest in cleaner tech, lower carbon technologies” (06:08).

Credits:
Produced by Zoe Culkin and Pierre Bienname
Supervising Producer: Michael Kosmides
Deputy Editor: Chris Zinsley

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