Exxon, Chevron profits boosted by refining as oil prices fall

By Anna Driver and Ernest Scheyder

(Reuters) - A surge in refining profits boosted quarterly results for Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N), helping to offset lower oil and gas output and slumping crude oil prices.

Both U.S. energy majors reported better-than-expected third-quarter profits on Friday, with executives touting the importance of owning massive refineries alongside oil and gas wells.

Exxon shares jumped 1.7 percent while Chevron advanced 1.6 percent as the broader market was sharply higher.

Refining profits tend to rise when oil prices fall, though low prices dent the profitability of wells. Having both in so-called integrated companies can allow for some insurance during price swings.

"Exxon Mobil's quarterly results demonstrate the strength of our integrated business model," Chief Executive Officer Rex Tillerson said in a statement after his company posted results.

Oil prices have slid some 25 percent since late June, allowing refiners to capture bigger profits as they tap cheap inland crudes from the U.S. shale oil revolution and fetch healthy prices selling refined products locally or exporting them.

Chevron posted third-quarter net income of $5.59 billion (3.50 billion British pounds) , or $2.95 per share, rising some 13 percent from a year ago and beating estimates of $2.55 per share, according to Thomson Reuters I/B/E/S. Profit at Chevron's refining unit jumped nearly fourfold.

At Exxon, profit increased 3 percent to $8.07 billion, or $1.89 per share, coming in higher than expectations of $1.71, according to Thomson Reuters I/B/E/S. Refinery profits jumped about 23 percent to $460 million.

The trend was especially visible this quarter among stand-alone refiners. Tesoro Corp (TSO.N) said on Friday its third-quarter earnings quadrupled to $396 million from a year earlier, while profits at Phillips 66 (PSX.N) more than doubled to $1.18 billion. Net income at Marathon Petroleum Corp (MPC.N) surged 75 percent.

Refining results helped the integrated companies, but their operations are under pressure from slipping output and high costs, which have concerned investors.

Chevron, the second-largest U.S. oil producer after Exxon Mobil, said production sagged as new wells failed to offset declines at old wells.

Company officials said they are accustomed to dips in prices that can affect upstream operations in a cyclical industry.

"By necessity we take a long-term view of prices because our investments last for decades. We continue to believe global demand for oil and natural gas will grow while existing sources of supply will inevitably decline," said Pat Yarrington, Chevron's chief financial officer.

Strong refining performance was a theme common to both companies, said Brian Youngberg, an oil company analyst with Edward Jones in St. Louis. "Refining exceeded expectations and basically offset lower oil prices and the lack of production growth."

(Reporting by Anna Driver in Houston and Ernest Scheyder; in Williston, North Dakota; Writing by Terry Wade; Editing by Jeffrey Benkoe)