Oil giants Chevron and Exxon Mobil reported mixed results for the third quarter, with both companies surpassing Wall Street expectations despite facing different challenges.

 Chevron saw a decline in year-over-year earnings but benefited from increased oil and gas production, while Exxon's profits were bolstered by strong oil output, including newly acquired volumes from Pioneer Natural Resources.

Oil industry earnings have been squeezed this year by slowing demand and weak margins on gasoline and diesel. But Exxon's year-over-year profit fell 5%, a much smaller drop than at rivals BP and TotalEnergies, which posted sharply lower quarterly results.

The top U.S. oil producer reported income of $8.61 billion, down from $9.07 billion a year ago. Its $1.92 per share profit topped Wall Street's outlook of $1.88 per share, on higher oil and gas production and spending constraints.

"We had a number of production records" in the quarter, said finance chief Kathryn Mikells, citing an increase of about 25% year-on-year in oil and gas output to 4.6 MMboe/d.

Exxon earlier this month flagged operating profit had likely decreased, leading Wall Street analysts to shave their quarterly per share earnings forecast by nearly a dime.

Record production

Exxon's results reflected the first full quarter of production following its acquisition in May of Pioneer Natural Resources. The acquisition has already boosted the company's cash flow, Mikells told analysts on a post-earnings call.

The $60 billion deal drove production in Permian basin, the top U.S. shale field, to nearly 1.4 MMboe/d, helping overcome a 17% decline in average oil prices in the quarter ended Sept. 30.

Volume growth from the Pioneer acquisition and its lucrative Guyana consortium added almost $3 billion to earnings in the first nine months of this year, Mikells said on a post-earnings conference call. Compared with the second-quarter, Pioneer output averaged slightly lower, she noted.

Despite the record, output from the Permian was still below Barclays' estimate of 1.5 MMboe/d, and Exxon's earnings from U.S. oil and gas production were also softer than forecast, the bank's analyst Betty Jiang said.

No. 2 U.S. oil producer Chevron, whose plans to acquire Hess Corp. have locked the two rivals in a bitter arbitration battle over Guyana, beat Wall Street estimates by a nine-cent margin compared with Exxon's four-cent beat.

That helped Chevron shares gain more than 3% on Nov. 1, while Exxon gave up more than 2% of premarket gains to trade about flat by noon ET (1600 GMT).

Exxon expects full year output to average about 4.3 MMboe/d, including eight months of Pioneer's contributions.

The company plans to issue a revised production forecast next month. It noted that scheduled well maintenance will lower output by about 30,000 boe/d in the fourth quarter.

The market is worried about oil supply outrunning demand next year, with exporter group OPEC reviewing plans to add 180,000 bbl/d of additional oil supply from December. Oil prices slumped over the summer and remain about 12% below June's average.

Refining slumps, chemicals grow

Exxon disclosed it raised its quarterly dividend by 4% after generating free cash flow of $11.3 billion, well above analysts' estimates. Rivals Saudi Aramco and Chevron have had to borrow this year to cover shareholder returns after boosting dividends and buybacks to attract investors.

Exxon's earnings from producing gasoline and diesel in the quarter were $1.31 billion, down from $2.44 billion year-on-year as weak margins and a nearly month-long outage at its 251,800-bpd Illinois refinery hit segment results.

Lower planned maintenance at other plants, along with gains on derivatives, helped offset weak industry-wide refining margins and the impact of the Illinois outage, Exxon said.

"Refining margins definitely came down in the quarter. If you look at overall results for the refining business, we feel pretty good," said CFO Mikells. Per unit refining margins since 2019 have about doubled on a constant margin basis, she said.

Profits from Exxon's chemical business, which has been pressured by industry overcapacity for two years, rose in the quarter to $893 million, compared with $249 million a year ago, on a slight increase in margins.

Chevron beats expectations

Chevron, whose proposed $53-billion takeover of Hess has been delayed due to a challenge by rivals Exxon Mobil and CNOOC Ltd., reported an adjusted profit of $4.53 billion, compared to $5.72 billion a year ago.

Shares rose 2% before normal trading hours.

Oil industry profits have sagged this year due to softer crude prices and weaker fuel demand growth. Oil futures in the quarter ended Sept. 30 averaged 17% below the prior quarter, and global fuel margins have suffered from slowing demand growth and excess supplies.

European oil majors BP and TotalEnergies this week also posted weaker results on sharp year-over-year declines in refining margins and lower oil prices. Exxon Mobil posted higher-than-expected profit on raised oil production, but profit fell 5% from a year ago.

Chevron said it earned $2.51 per share for the quarter on an adjusted basis, compared to analysts' estimates of $2.42 according to LSEG data, helped by a 7% year-over-year increase in oil and gas volumes and operating cost cuts. Year-ago adjusted profit was $3.05 per share.

"We also are taking steps to optimize our portfolio and reduce operating costs to deliver superior long-term value to shareholders," CEO Michael Wirth said in a statement.

Up to $3 billion in cost savings are planned through 2026 from leveraging technology, asset sales and changing how and where work is performed, the company said.

Chevron has said it will move its headquarters to Texas from California, and open a new, nearly $1-billion engineering center in India

Savings are needed to boost returns. This year, share buybacks and dividends have outstripped earnings. The third quarter's $4.5-billion profit was less than the $7.7 billion spent on shareholder returns.

Pending sales of oil properties in Canada, Alaska and Congo will generate about $8 billion in pre-tax proceeds. All three sales are expected to close this quarter, the company said.

Operating profits were down compared to a year ago in both its major units. Earnings from pumping oil and gas fell 20% to $4.59 billion while profit from refining oil into gasoline and diesel tumbled 65%, to $595 million.

Well maintenance and asset sales will reduce fourth-quarter oil and gas output by about 90,000 barrels per day, but the company remains on track for a roughly 7% year-over-year increase. A closely watched oil-expansion project in Kazakhstan is on track for initial startup in the first quarter, the company said.

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