The world’s biggest oil companies delivered a turbulent set of first‑quarter earnings, underscoring how the war in Iran and the closure of the Strait of Hormuz have distorted both profits and physical flows.
While Shell and BP beat expectations on the back of strong trading and higher prices, ExxonMobil and Chevron reported headline profit declines, blaming “paper losses” from hedging mismatches.
ExxonMobil and Chevron: Profits hit by timing effects
ExxonMobil reported net income of $4.2 billion, down sharply from $7.7 billion a year earlier.
Adjusted earnings, however, came in at $8.8 billion, beating Wall Street forecasts. Revenue rose to $85.1 billion, reflecting higher crude prices.
Chief executive Darren Woods said about 15% of Exxon’s production was disrupted by the war, with 750,000 barrels per day at risk if Hormuz remained closed.
Hedging losses of nearly $4 billion weighed on reported results, creating what he called a “timing effect.”
“These are timing effects. The physical barrels will catch up, but the accounting impact is immediate.”
Chevron posted net income of $2.2 billion, compared with $3.5 billion last year.
Adjusted earnings of $1.41 per share beat consensus estimates, though revenue slipped to $48.6 billion.
CEO Mike Wirth stressed Chevron’s lower exposure to Middle East operations, but acknowledged that hedging mismatches and deferred deliveries had distorted the quarter.
“Our exposure to Middle East operations is limited, but the volatility in futures markets and deferred deliveries distorted reported earnings,” Wirth added.
Shell: strong beat, buyback trimmed
Shell stood out with adjusted earnings of $6.92 billion, comfortably above analyst expectations of $6.36 billion.
CEO Wael Sawan credited “relentless operational performance” despite unprecedented disruption.
The company announced a $3 billion buyback program—slightly reduced from previous quarters—and a 5% dividend hike.
Net debt rose to $52.6 billion, reflecting higher working capital needs as oil prices surged.
Shell also confirmed its $16.4 billion acquisition of ARC Resources, expected to add 370,000 barrels of oil equivalent per day and support long‑term growth.
Relentless operational performance allowed us to deliver strong results despite unprecedented disruption in global energy flows.
Wael Sawan
Chief Executive Officer at Shell
BP: Trading gains offset volatility
BP reported underlying replacement cost profit of $3.2 billion, more than double the prior quarter, with reported profit at $3.8 billion.
Strong oil trading and refining margins drove results, though net debt climbed to $25.3 billion due to a working capital build.
CEO Meg O’Neill emphasised BP’s resilience and reiterated capex guidance of $13–13.5 billion for 2026, alongside a commitment to annual dividend growth of at least 4%.
Trading strength and refining margins offset volatility. Our balance sheet remains resilient even as working capital demands increased.
Meg O’Neill
Chief Executive Officer at BP
Analysts noted BP benefited from longer shipping routes and inventory swings caused by Hormuz disruptions, which boosted trading margins but strained cash flow.
Conflict impact: futures vs physical barrels
Across the majors, the Middle East war defined Q1 performance.
Futures markets priced in peace hopes quickly, sending oil benchmarks lower, but physical flows remained constrained.
Rystad Energy estimated that even under a phased reopening of Hormuz, meaningful volume recovery would take six to eight weeks, keeping spot prices elevated.
“Global physical supply of crude oil could take up to eight weeks to return to pre‑conflict levels. The price impact of a deal is being felt immediately in futures, but the physical market will take considerably longer to agree.”
Exxon and Chevron saw profits dented by hedging mismatches, Shell leveraged higher prices to beat forecasts, and BP capitalized on volatility through trading.
All four companies warned that geopolitical uncertainty would continue to shape results.
Outlook
The paradox for oil majors is clear: high prices support revenues, but logistical bottlenecks and hedging distortions weigh on reported profits.
Investors are watching Exxon and Chevron for recovery once deferred profits are booked, Shell for integration of ARC Resources, and BP for sustained trading strength.
With the Strait of Hormuz still unstable, second‑quarter earnings will hinge on whether peace talks translate into actual barrels reaching markets.
Until then, the majors remain caught between futures optimism and physical market constraints.
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