Majors post $56 billion profit but keep capital spending flat

By James Calloway

Third-quarter results from BP, Chevron, Exxon Mobil, Shell and TotalEnergies showed $56 billion in combined net profit, a near-record cash windfall eight months into the Iran conflict that began on February 28. Surging oil and gas prices, record-high refining margins and strong trading results drove the gain.

BP posted its highest quarterly profit ever at $8.5 billion as earnings from refining rose tenfold from a year earlier. For Chevron, Exxon, Shell and TotalEnergies, the quarter was generally their second-strongest on record, behind only the exceptional gains booked after Russia invaded Ukraine in February 2022.

What changed in oil and gas markets?

Joint US-Israeli strikes on Iran in February and the prolonged closure of the Strait of Hormuz brought Gulf exports to a halt and reduced refining capacity. The disruption upended the short-term supply picture and pushed Brent LCOc1 up about 60% to $114 a barrel from the start of the conflict on February 28.

European benchmark natural gas prices reached their highest level since late 2022. Diesel remained close to September’s all-time high above $200 a barrel as refinery outages and disrupted trade flows tightened fuel markets.

The quarter combined higher commodity prices with unusually strong refining and trading performance.

Where is the windfall going?

Before the conflict, energy companies expected a flood of new oil and LNG supply later in the decade to pressure prices. Many had cut spending plans, frozen hiring and intensified cost-saving programs. The market shock did not reverse that caution, and most excess cash went to stronger balance sheets and share repurchases.

Combined net debt across the five majors fell to $117 billion in the third quarter from $204 billion in the first. BP entered the conflict with one of the group’s highest debt burdens. It nearly halved net debt to $13.9 billion from a year earlier, and its CEO said the company would continue reducing debt.

Share buybacks rose to $12.3 billion in the third quarter, little changed from the previous quarter. Shell and TotalEnergies announced sharp increases over the next three months. Exxon said it planned $20 billion of buybacks in 2027, similar to this year.

The windfall repaired balance sheets and increased shareholder returns without triggering a broad supply expansion.

Are 2026 capital budgets changing?

Capital spending and dividend policies carry longer-term commitments that companies cannot reverse easily if market conditions deteriorate. Shell nevertheless reduced its 2026 capital spending guidance by $1 billion, to $23 billion to $25 billion, despite the improvement in commodity prices. Chevron expects 2026 spending to remain at the lower end of its $18 billion to $19 billion range.

Boards will review 2027 spending plans before year-end. They could increase shareholder distributions or accelerate investment, but current indications point mostly toward returning more capital rather than sanctioning a broad slate of new supply projects.

The majors have kept their 2026 spending plans largely unchanged despite the exceptional cash flow.

Why is North American gas different?

Extreme volatility and an uncertain outlook have also restrained large acquisitions because buyers and sellers cannot agree on fair valuations. North American natural gas is the exception, with abundant supply and relatively predictable pricing making transactions easier to complete.

Shell’s $16.4 billion acquisition of Canada’s ARC Resources in April reflected growing confidence in North America’s expanding LNG export sector and long-term gas demand. The completed transaction gives Shell a larger gas position as buyers search for feed gas and export capacity.

TotalEnergies has indicated interest in deals that could raise its US gas production by around 1 billion cubic feet per day. CEO Patrick Pouyanne said oil assets remained too expensive at current valuations. Shell’s ARC purchase is complete; Total’s 1 billion-cubic-foot-per-day goal remains a prospective deal target rather than an approved production increase.

North American gas has attracted capital where supply and pricing are visible, while oil acquisitions still face valuation resistance.

What does the caution imply for markets?

Energy executives do not appear ready to treat today’s elevated prices as the start of a new supercycle. The 2014 oil-price collapse, the pandemic crash and the post-Ukraine boom have reinforced a preference for financial discipline over production growth.

The long-term uncertainty has not improved, particularly over the speed and shape of the energy transition in Asia, and may have worsened. The wars in Ukraine and the Middle East have highlighted the risk of relying on imported fossil fuels. That could spur stockpiling and encourage more domestic production from both traditional and alternative sources.

Reuters columnist Ron Bousso, author of the analysis, expects tight oil and gas markets to support hefty profits in the short term. Over a longer horizon, he sees geopolitical fracture and energy nationalism producing greater market volatility. His conclusion was direct: “This suggests today’s caution is warranted.”

Tight markets can support profits now without resolving the industry’s longer-term spending and demand doubts.

Watch item: The year-end 2027 spending reviews, particularly whether higher cash flow leads the boards to approve new capital commitments or only larger shareholder distributions.