Major oil companies are set to gain billions from the financial boost following the conflict in Iran, after a month marked by skyrocketing energy prices

This week, as Big Oil executives convened to discuss the unprecedented disruption to global energy supplies caused by the war in Iran, one significant impact remained unaddressed in their public discourse: the multibillion-dollar windfall they stand to gain from the skyrocketing prices of the energy they provide.

In March, the global benchmark Brent crude has averaged approximately $97 per barrel, reflecting a 33% increase from the $69 average recorded in February and a notable rise from the $65 average in January. The U.S.-Israeli conflict with Iran that began on February 28 has disrupted a fifth of the global supply that transits through the Strait of Hormuz waterway. In certain regions of the world, natural gas prices have increased significantly.

The scenario may mirror 2022, a year when Big Oil set profit records following Russia’s February invasion of Ukraine, which disrupted energy markets. During that year, oil companies provided shareholders with unprecedented dividends and share buybacks. Public outrage has ignited demands for windfall profit taxes. “The first quarter is set to be exceptional for these companies.” “I believe there’s no alternative to that,” stated Leo Mariani, a senior research analyst at Roth Capital Partners.

U.S. shale producers and other companies lacking significant operations in the Middle East are likely to benefit the most, enjoying higher prices without the burdens of shut-in production, stranded tankers, or costly repairs to facilities affected by conflict. Nevertheless, executives indicated that the substantial profits are unlikely to enhance their intended capital expenditures on new production.

Chevron, Shell, and Exxon Mobil are poised to generate billions.

Over the last month, six analysts monitoring Chevron have updated their forecasts for the U.S. oil giant’s first-quarter per-share earnings, increasing estimates by an average of approximately 40%, as reported by LSEG data. Three analysts monitoring London-based Shell raised their net profit forecast for the three-month period by an average of 15%.

The consensus estimate from Wall Street for Exxon Mobil’s full-year per-share earnings has been adjusted upward by approximately 4% since prior to the war, which is less than the projections for other companies. Stewart Glickman, director of equity research at CFRA Research, noted that this may be attributed to Exxon, the largest oil company in the U.S., having greater production exposure to disruptions in the Middle East.

In the past month, four analysts monitoring Exxon have raised their earnings estimates, while three have made downward revisions, as reported by LSEG data.

Exxon is set to release its first quarter earnings snapshot next month, highlighting the factors that influenced its earnings. Shell is set to publish a quarterly update note on April 8, outlining the anticipated financial impacts stemming from the conflict. This month, part of Shell’s Pearl GTL facility in Qatar sustained damage due to attacks.

In the fourth quarter, Chevron produced 4 million barrels per day, while the average Brent spot price stood at $64 per barrel. With a projected increase of $33 per barrel, the additional revenues for March would total approximately $4 billion, based on a calculation by Reuters.

Exxon generates nearly 5 million barrels of oil each day. Assuming the same price increase per barrel, the additional revenues in March would total approximately $5.1 billion.

Timing effects, along with hedging, indicate that certain cash flow and earnings may not be reflected in the company’s results until the second quarter or beyond.
The conflict has significantly disrupted the gas market. In Asia, liquefied natural gas prices have surged by 143% since the onset of the war.

Some potential gains may be limited due to decreased oil and gas production from facilities in the Middle East, along with the extra expenses incurred in fulfilling customer obligations by redirecting oil and gas from other sources. Several facilities have suffered damage due to Iranian missile and drone strikes.

James West, head of energy and power research at Melius Research, noted that the suspension of exploration and production activities in the Middle East could negatively impact oilfield-service companies.

According to West, SLB derives 34% of its revenue from the Middle East and North Africa region, whereas Weatherford International obtains 44% of its revenue from the same area.

Weatherford has not provided a response to the request for comment. Exxon, Shell, and Chevron chose not to provide any comments. SLB referenced an earlier statement indicating that revenue for the first quarter would fall short of expectations and that the company anticipates incurring additional costs, which will affect earnings by approximately 6 to 9 cents per diluted share.

U.S. shale producers may experience significant increases.

Wall Street estimates indicate that Diamondback, a U.S. shale producer lacking international assets, is expected to report first quarter earnings nearing $3 per share, reflecting a 28% increase compared to prior estimates made before the war, according to Glickman. Analysts seem to anticipate a comparable increase for the entire year and have adjusted their forecasts for Diamondback’s per-share earnings upward by 22% from prior estimates before the conflict, he noted.

“According to Glickman, it indicates that company estimates are incorporating longer-term effects, despite the (Trump) administration’s efforts to instill confidence in the market that traffic will resume through the Strait of Hormuz.” Diamondback has not provided a response to the request for comment.

The oil industry is entirely reliant on the price. “The price has gone up, and every oil company stands to gain,” stated Anil Agarwal, founder of Cairn Oil & Gas, a private oil and gas producer in India.

Bumper first-quarter profits, however, are unlikely to lift capital spending plans or trigger investment in boosting production, said Jeff Lawson, executive vice-president with Cenovus, one of Canada’s largest oil sands companies. “I don’t want to rely on the oil prices we’ve just seen, because it feels like a horrible blip,” Lawson said.

Lawson did not address the implications of the prices for Cenovus’ first-quarter profits, but he noted that a short-term price spike is unlikely to lead any Canadian oil sands producer to approve a new project. “Oil’s going to go up, oil’s going to go down, and I need to demonstrate that a new project is viable over a five to seven-year period,” he stated.