What’s News in Earnings: Oil Companies See Mixed Fortunes Under Trump

Summary

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

---

For more in-depth analysis and future updates, subscribe to the Wall Street Journal at subscribe.WSJ.com/whatsnews.

Transcript

[Luke]

Hey, it's Luke. And if you've made it through the credits, you're clearly hungry for the kind of actionable and ahead of the curve reporting we bring you every day. For that and so much more, subscribe to the Wall street journal for just $2 a week by visiting subscribe.WSJ.com whatsnews.

[Chip Cutter]

Hey, listeners, it's Wednesday, February 19th. I'm Chip Cutter for the Wall Street Journal, and this is what's News in earnings, our look at the broad themes that stood out in the latest earnings season. Today we're focusing on the energy industry. Oil giants have already watched their annual profits dip as a result of low natural gas prices and lower margins in their oil refining businesses. And now many are trying to prepare for far less favorable market conditions ahead, with some big strategy shifts coming, too. President Trump is looking to slash regulations to help big energy companies, but he also wants to see the price of crude oil fall, an unwelcome prospect for companies such as Exxon and Chevron. How are they responding? Colin Eaton writes about the largest oil companies and global energy issues in the Wall Street Journal's Houston bureau. He joins us now. Hi, Colin.

[Colin Eaton]

Hi, Chip.

[Chip Cutter]

Colin, you've been sifting through the earnings reports of big oil companies like Exxon, Chevron and others over the past few weeks. What's the biggest trend that jumps out at you?

[Colin Eaton]

So if you take a look at just the top 10 US oil and gas companies, from Chevron and Exxon down to Devon, collectively they brought in about $17.5 billion in net income in the fourth quarter. It sounds like a lot of money, and it is. But actually it's the lowest amount of money they've earned altogether since late 2021. Now, they had been riding high for about three years. Three years ago, you recall, Russia invaded Ukraine. Energy prices went through the roof post Covid. Oil demand started to shoot up. Oil companies started making money again, and they started to shell out record sums of money to shareholders via dividends and stock buybacks. Fast forward to where we are now. Oil and gas prices have come back down to earth. Their earnings have followed. Natural gas prices have been pretty weak. Refinery margins have tightened a lot since gasoline prices were at a record $5 a gallon nationally in the summer of 2022. So all that weighs on earnings for companies like Exxon and Chevron. Those two companies I want to mention in particular are still trying to pump as much cash as they can to shareholders. Last year, they sent shareholders $63 billion combined in share buybacks and Dividends. That's because they're in competition for investors, not only with each other, but the broader S&P 500, which has shifted a lot of weight to big tech companies in recent years.

[Chip Cutter]

Given all of this, it seems like many of the biggest oil companies, including Chevron and bp, are now in cost cutting mode. I mean, Chevron recently said it would cut up to 20% of its jobs. What's behind some of those moves?

[Colin Eaton]

The companies are looking to just trim as much as they can in response to what could be a more challenging year or two. President Trump wants to bring oil prices down. He's meeting with Saudi Arabia and Russia this week, and the expectation is that they're pushing for an end result that could put more oil on the market. There's not a whole lot of room in the market right now for more oil that could put further pressure on oil and gas company earnings. So companies are cutting costs, chevron cutting some 8,000 workers. I mean, it's part of the expectation that their costs have to come down if they're going to keep putting out as much money to shareholders as they have been.

[Chip Cutter]

Yeah, and I saw that ConocoPhillips said it was going to be even more aggressive with dividends and share buybacks, but that its earnings were down from $3 billion a year ago to about $2.1 billion. It's interesting you mentioned President Trump. He's got this rep being a friend to big oil. There's the whole drill, baby, drill. Right. But it seems like his policies are a mixed bag for oil companies. From this quarter's earnings reports and investor calls, what are oil executives saying? They're paying attention to most from Trump.

[Colin Eaton]

President Trump, in his first week in office, issued a lot of executive orders aimed at cutting regulations for oil companies. And he said he wants to unleash American oil, export more oil and natural gas abroad, and streamline the permitting process for these companies. But a lot of his policies, like tariffs on Canadian crude, for example, the oil industry sees those as a threat to their bottom line. If tariffs on Canadian crude had gone through or go through sometime this year, then refiners may have to ultimately cut back on the amount of fuel they produce, which could raise prices at the pump. The oil and gas companies see foreign policy as very important because the Trump administration has said that they're going to put maximum pressure on Iran, which could raise prices. But he also wants OPEC to be a counterweight to that, to put more oil on the market so that oil prices go down. And if that happens, that's more pressure on their earnings.

[Chip Cutter]

So many big energy companies seem to be shaking up their longer term strategies. You've been covering some of this and I wonder how are oil giants adjusting their approaches for the future given all of these factors that we're talking about here?

[Colin Eaton]

Oil companies are looking to keep investments relatively flat in the U.S. that means that oil production probably isn't going to go much higher than it is currently, which is not exactly what President Trump had hoped for. They're in this capital discipline mode where investors want to see them return as much cash as they can to shareholders rather than pursue growth. So it's going to be more of the same. And they're sort of riding oil and gas prices at this point. They're waiting to see how the market shapes out before they make any big investments.

[Chip Cutter]

Finally, climate change remains a threat. So how are companies prioritizing renewable sources of energy? Is there a real focus or have the biggest companies largely de emphasized such projects?

[Colin Eaton]

The oil companies are still working on developing projects. Hydrogen and carbon capture. Some of the newest initiatives that they're looking at building natural gas power plants to meet the demand for AI. These would be natural gas fired power plants with the ability to capture the carbon that is emitted from their operations. So they're still looking at a number of ways to invest in cleaner tech, lower carbon technologies. But it does seem like the pressure from ESG related investors has eased up in the past year or two. And companies are certainly emphasizing that they are oil companies first. And that's where they plan to make their money for the next 30 years.

[Chip Cutter]

Colin Eaton writes about the largest American oil companies and global energy issues in the Wall Street Journal's Houston bureau. Colin, thanks for being here.

[Colin Eaton]

Thanks so much, Chip.

[Chip Cutter]

And that was what's news in earnings. Today's show was produced by Zoe Culkin and Pierre Bienname with supervising producer Michael Kosmides and deputy editor Chris Zinsley. Later today we'll have the PM edition of what's News out for you as usual. And we'll be back later this earnings season, diving into another industry. Until then, I'm Chip Cutter. Have a great.