While energy stocks outperformed other sectors last quarter, Wall Street expects lower year-over-year profits from giants like Chevron ( CVX ) and ExxonMobil ( . three months of the year.
Investors will also look forward to updates on the oil giants’ future acquisitions, including Exxon’s dispute over the Chevron-Hess (HES) deal.
Chevron’s first-quarter adjusted profit is expected to come in at $2.90 per share, down about 18% from the same period last year, on revenue of $49.17 billion, according to Bloomberg estimates.
ExxonMobil’s revenue is expected to be $80.25 billion, with adjusted earnings of $2.19 per share, down 22% from a year ago.
On average, crude oil prices in the first quarter of this year were slightly higher than last year. The biggest price action occurred in mid-March, when West Texas Intermediate prices broke above $80 amid rising geopolitical tensions.
“The usual suspect for operating earnings per share moves – crude oil prices – is not the key this time,” Stewart Glickman, energy equity analyst at CFRA Research, told Yahoo Finance.
“Natural gas prices have fallen about 20% year over year, and natural gas makes up about a third of hydrocarbon production. It doesn’t help that refining margins, while decent, are way down from early 2023 highs,” he added.
Natural gas is usually produced when drilling companies extract oil, further exacerbating supply surpluses.
“Strong WTI prices come at an unwelcome time for U.S. gas producers who are already facing significant oversupply in the U.S. gas market,” FactSet senior energy analysts Connor McLean and Trevor Fugita noted earlier this week.
Most Wall Street analysts expect oil to remain above the $80 level for a while.
“There is potential for the energy sector as a whole to continue to outperform based on oil trading above $80 per barrel,” Sean O’Hara, president of Pacer ETF Distributors, told Yahoo Finance.
For the second quarter, FactSet expects earnings growth of 14.6%, while for the third and fourth quarters it expects earnings to decline 2.7% and 0.2%, respectively, as crude oil has peaked.
The topic of recent mergers is likely to surface during Big Oil’s earnings calls, given ExxonMobil’s dispute over Chevron’s plan to acquire Hess and its most valuable asset, a 30% stake in an oil-rich block off the coast of Guyana , to buy.
ExxonMobil has a 45% stake in the productive block. ExxonMobil says it has the right of first refusal for Hess’ interest and recently filed for arbitration after initial talks ended.
Chevron’s $53 billion proposal to buy Hess came more than a week after ExxonMobil announced last year it would buy Pioneer Natural Resources (PXD) for nearly $60 billion. The acquisition will allow ExxonMobil to double its footprint in the Permian Basin, the largest oil-producing region in the US.
On Thursday, Hess posted better-than-expected first-quarter results thanks to a 70% increase in production in Guyana. The results bode well for ExxonMobil, given its importance in the region.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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