Oil majors are heading into third-quarter earnings with stronger refining outlooks linked to the Iran war, putting plans for potential cash gains under scrutiny as U.S. households face higher energy costs.
Shell projected an indicative refining margin of $42 a barrel for the quarter, compared with $24 in the second quarter. TotalEnergies expects cash flow from its Refining & Chemicals business to increase by $2 billion from the previous quarter. Those figures are outlooks; third-quarter results have yet to be reported.
ExxonMobil estimated that market factors, including margins and trading, would add $4.5 billion to earnings in its Energy Products business compared with the second quarter. The estimate covers selected factors and is not a forecast of companywide profit.
Reuters said disruption to shipping through the Strait of Hormuz after February's U.S.-Israeli airstrikes raised energy prices and created trading opportunities. The conflict has also imposed costs on households. Moody's Analytics Chief Economist Mark Zandi estimated a burden of nearly $2,000 per U.S. household, including roughly $1,100 for energy and transportation.
Separately, BP projected net debt of $13.5 billion to $14.5 billion at the end of the third quarter, down from $22.3 billion at the end of the second. Reuters reported that BP has paused share buybacks this year as it works to reduce debt.
Analysts are watching what companies do with any additional cash. HSBC expects Shell to announce a $3.5 billion share buyback for the fourth quarter, Reuters reported. HSBC analysts Kim Fustier and Sadnan Ali expect BP to keep prioritizing debt reduction, maintain capital spending and refrain from restarting buybacks before 2028, according to Reuters.
RBC Capital Markets analyst Biraj Borkhataria framed the earnings season as a test of whether producers stick to existing spending plans amid exceptional returns, Reuters reported. The concern follows past periods of boom-and-bust spending in the sector, the wire service said.
Shell and TotalEnergies are due to report Oct. 29. BP, Chevron and ExxonMobil follow Oct. 30, and BP has scheduled a strategy update for Dec. 15.
