When Oil Prices Drop but Exxon and Chevron Remain Unchanged

Oil Majors Defy Price Drop with Stock Gains

In 2025, even as oil prices tumbled by 20%, the largest international oil companies saw their share values climb between 4% and 18%. This surprising trend broke the usual link between oil prices and energy stock performance.

Investors responded positively last year, appreciating the companies’ ability to maintain strong returns despite falling crude prices. They also welcomed the renewed focus of European oil giants on expanding upstream operations, Exxon and Chevron’s record-setting production in the Permian Basin, the cost-saving benefits from recent major U.S. acquisitions, and aggressive efficiency drives across all five leading oil firms.

Looking ahead, these companies face a tougher environment. With oil prices hovering in the low $60s per barrel—except for brief surges due to geopolitical events—oil majors must work harder to satisfy shareholders.

Analysts warn that the recent trend of rising share prices amid declining crude may not last. As profits are expected to shrink with lower oil prices, some companies may need to scale back share buybacks to preserve financial stability.

2025: Streamlining and Savings

Last year, the top oil companies took decisive steps to cut costs, including thousands of job reductions and, for ExxonMobil and Chevron, capitalizing on the advantages of recent mega-mergers.

Industry consolidation, weaker oil prices, and technological advancements prompted Big Oil to accelerate layoffs and streamline operations. Office staff and contractors were reduced, with companies pledging billions in cost savings and leaner corporate structures. These efforts aimed to eliminate inefficiencies and maintain shareholder payouts, even as oil prices remained well below the highs of 2022.

ExxonMobil, for example, cut approximately 400 jobs in Texas after acquiring Pioneer Natural Resources in a $60 billion deal in May 2024. The company also announced plans to eliminate 2,000 jobs globally, with nearly half of those reductions at its Canadian subsidiary, Imperial Oil.

Chevron, following its $53 billion acquisition of Hess Corporation, revealed plans to cut its workforce by 20% by the end of 2026, including 800 jobs in the Permian Basin.

BP, under mounting pressure from shareholders to reduce expenses and debt, announced in August that it would speed up reductions in both contractor and office-based staff.

BP’s chief financial officer, Kate Thomson, stated during the Q2 earnings call that these workforce reductions are expected to deliver significant additional savings starting in the first quarter of 2026.

Cost Cutting Fuels Strong Cash Flow

The shift away from unprofitable low-carbon ventures and aggressive cost reductions at European oil majors allowed the industry to generate nearly as much free cash flow at $65 Brent in 2025 as it did in 2008, when oil averaged $100 per barrel.

According to Bloomberg, the five largest oil companies—Exxon, Chevron, Shell, BP, and TotalEnergies—produced $96 billion in free cash flow last year. This figure is close to the $101 billion generated in 2008, despite much lower oil prices. While free cash flow has declined from the record $194 billion seen in 2022, it remains historically robust.

Today’s oil majors are leaner and more focused on delivering value to shareholders, aiming to attract investors who had previously shunned the sector due to predictions of imminent peak oil demand and the rise of ESG investing trends.

However, the renewed emphasis on energy security and affordability following the 2022 crisis has allowed the industry to ramp up production and meet growing global demand for oil and gas.

2026: A Tougher Road Ahead

With oil prices expected to remain subdued and a significant supply glut anticipated in early 2026, oil majors, national oil companies, and independent producers face even greater strategic challenges, according to Wood Mackenzie analysts Tom Ellacott and Greig Aitken.

Companies are preparing for a difficult year, with share buybacks likely to be among the first areas to see reductions.

“Persistently low oil prices will require deeper structural cost cuts and reduced buybacks. At the same time, companies must lay the groundwork for long-term resilience,” the analysts observed.

Several oil majors have already cautioned that their fourth-quarter earnings will be lower than the previous quarter, citing weak prices for oil and chemicals, as well as softer trading results.

ExxonMobil recently indicated that its upstream earnings for Q4 could fall by $800 million to $1.2 billion compared to Q3, with chemical division profits potentially shrinking by up to $400 million due to lower industry margins.

Shell warned that its chemicals and products segment is likely to post a loss in Q4, driven by weaker margins.

BP expects to record up to $5 billion in impairments for the fourth quarter, mainly related to its energy transition assets, with oil trading underperforming and gas trading remaining average at the close of 2025.

With the market oversupplied and prices under pressure, oil majors face difficult choices in the coming year. Should they opt to reduce or slow share buybacks, investors may respond by withholding the premium performance that has outpaced crude prices in recent years.

By Tsvetana Paraskova for Oilprice.com

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