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Written by Matt DiLallo for The Motley Fool->
Exxon and Chevron plan to maintain their capital spending and production plans.
ConocoPhillips is increasing its budget range to reflect a modest increase in drilling activity in the Permian Basin.
Diamondback Energy is bringing more barrels to the market immediately by ramping up its completion activities and adding more drilling rigs.
Oil prices have rocketed this year due to the war with Iran. WTI, the primary U.S. oil price benchmark, has risen 85% to more than $100 a barrel. The prolonged closure of the Strait of Hormuz is forcing the world to burn through oil stockpiles at a record pace.
While recent reports suggest a peace deal could be close, the current supply disruption could persist even if there's an agreement. The uncertainty is prompting some oil companies, including industry giants ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX), to remain cautious and maintain their capital spending plans. However, a couple of oil stocks have opted to capitalize on the price surge by ramping up their activity levels. Here's why Chevron and Exxon aren't budging, and two other notable oil companies that plan to drill more wells this year.
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Oil companies typically respond to higher prices by increasing their capital spending to boost their production. Higher prices often signal strong demand, necessitating more supply. However, this year's surge in crude prices is due to a major supply issue instead of robust demand. That's why oil giants Chevron and Exxon aren't changing their capital spending plans yet.
Chevron CEO Mike Wirth noted on the oil giant's first-quarter conference call that "despite changes in the external environment, we're executing our plan with discipline, consistent with our long-standing financial priorities." That means maintaining its $18 billion-$19 billion capex budget for the year, which is at the low end of its long-term guidance range of $18 billion to $21 billion. That disciplined approach will give it more flexibility in future periods to continue investing in growing its business and returning cash to investors.
ExxonMobil's CEO Darren Woods shares a similar view. He stated on the first-quarter call:
The conflict in the Middle East contributed to a highly volatile operating environment. Supply tightened. Logistics became more complex. Markets moved quickly. That kind of environment does not change our strategy; it proves its effectiveness.
As a result, Exxon will also maintain its 2026 capital spending plan of $27 billion to $29 billion, and its 2027 through 2030 capital spending plan of $28 billion to $32 billion.
While Chevron and Exxon aren't planning to increase their capital budgets or production plans, other oil companies are starting to adjust their strategies, including ConocoPhillips (NYSE: COP) and Diamondback Energy (NASDAQ: FANG).
ConocoPhillips initially set a $12 billion capital spending budget for this year. However, in light of the current supply disruptions and higher oil prices, ConocoPhillips has "added a modest amount of Permian activity over the second half of the year to maintain our operational efficiency into 2027," stated CEO Ryan Lance on the first-quarter conference call. As a result, it's raising its capital budget to a range of $12 billion to $12.5 billion, reflecting uncertainty about when it will resume spending on two LNG projects in Qatar. The incremental production from those wells will help provide the global economy with more supply in the second half of this year.
Diamondback Energy is also capitalizing on the supply disruption by ramping up its activities. CEO Kaes Van't Hof wrote in the oil company's first-quarter shareholder letter: "Because of our positioning, our preparation, and this price signal, we are bringing incremental barrels to the market immediately." It's doing so by working down its inventory of drilled but uncompleted wells to maintain its current production rate of over 520,000 barrels per day, a 3% increase from its original guidance. Additionally, the company plans to add two to three more drilling rigs to backfill this inventory. Overall, Diamondback is raising its capital spending from $3.75 billion to $3.9 billion.
While oil giants Exxon and Chevron plan to remain disciplined amid the surge in crude prices, ConocoPhillips and Diamondback Energy are responding by ramping up their activity. While they're not stomping on the accelerator by any means, they are bringing incremental production to the market at a time when it desperately needs more oil. That will put them in an even better position to capitalize on higher oil prices, which could remain elevated into next year even if the Strait of Hormuz reopens soon. Their decision to reaccelerate could give them the fuel to outperform their more conservative rivals in the coming quarters.
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Matt DiLallo has positions in Chevron and ConocoPhillips. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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