Key Takeaways
- Exxon Mobil signed a nonbinding memorandum with Venezuela and PDVSA to explore upstream projects, nearly two decades after Venezuela expropriated its assets.
- Adjusted refining earnings jumped to $9.1 billion in the third quarter, so Exxon’s refineries outearned its oil fields.
- Exxon’s $20 billion 2027 buyback leans on a refining boom tied to Middle East and Russian supply disruptions that could fade.
- The fourth-quarter report, expected in late January or early February, will show how much of the refining windfall survives.
Exxon Mobil (XOM) signed a nonbinding memorandum of understanding with Venezuela’s government and PDVSA on Monday to explore upstream opportunities. It’s Exxon’s first formal step back since Venezuela expropriated its assets under Hugo Chavez nearly two decades ago.
Chevron (CVX) already has a head start. Its third quarter included a month of Venezuelan production after an accounting change, and adjusted earnings reached $10.4 billion.
The timing makes sense. Exxon just posted a quarter in which its refineries outearned its oil fields, and that cash backs a $20 billion buyback plan for 2027.
So is Venezuela a real growth option, or mostly a gesture toward Washington?
A memorandum with conditions attached
The agreement commits Exxon to nothing yet. A final joint venture or production-sharing contract would still be needed, and Exxon hasn’t named the fields it’s studying.
Instead, the company spelled out its terms. Any future investment would require stable policies, clear regulations, strong investment protections and competitive returns.
That’s a high bar in a country that has seized Exxon’s assets before. Still, the deal hands President Trump a win, since he has pushed US companies to lead Venezuela’s oil revival.
Exxon can afford to be patient. Third-quarter earnings more than doubled from a year earlier…
Reported earnings hit $15.4 billion, or $3.72 a share, versus $7.5 billion a year ago. Revenue climbed 32.7% to $113.2 billion.
Refineries did the heavy lifting
Adjusted Energy Products earnings jumped to $9.1 billion from $4.1 billion in the second quarter. Upstream earnings, meanwhile, fell 20% to $7.3 billion as crude prices eased and Guyana entitlement effects accelerated.
Darren Woods framed the shift on CNBC. “Frankly, diesel is the key crunch point here because it is so critical to economic growth,” the CEO said.
Attacks on refineries in Russia and the Middle East have tightened fuel supply, and Exxon’s Gulf Coast plants ran at 100% utilization. So how does that compare with its closest rival?
Chevron’s downstream earnings rose to $4.9 billion from $1.1 billion a year earlier. Exxon’s reported refining profit of $7.2 billion was roughly 45% larger, though.
Both majors rode the same diesel squeeze, but Exxon’s decade of refinery upgrades gave it more barrels to sell.
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The buyback leans on diesel
Cash flow is where the boom shows up most. Operating cash flow hit $25.7 billion, and free cash flow reached $19.1 billion.
Exxon returned $9.4 billion in the quarter, including $5.1 billion of buybacks. It also lifted the dividend 3.9% to $1.07 and has cut net debt by nearly $11 billion this year.
That leaves the 2027 plan looking well funded, at least for now…
Woods argues the gains are structural, pointing to $16.9 billion in cost savings since 2019. Yet the $20 billion buyback is conditioned on reasonable market conditions, and de-escalation in the Middle East could squeeze diesel margins fast.
My take: Exxon’s refining bet is paying off, and Woods deserves credit for a decade of upgrades. Still, this quarter flatters the business. Venezuela looks like a cheap option today, but I wouldn’t count any barrels until a contract is signed.
The fourth-quarter report, expected in late January or early February, is the next test. It will show how much of the refining windfall survives as fuel markets cool.
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