High oil prices and war impact are playing on the same field! Upstream profits of oil and gas giant Exxon Mobil Corporation (XOM.US) increased by 63%, while Middle East exposure is depressing cash flow.

The latest performance report released by the United States' largest oil and gas giant, Exxon Mobil Corporation (XOM.US), on Friday showed strong performance in the background of high oil prices due to political conflicts in the Middle East GEO Group Inc. The first quarter adjusted profit data significantly exceeded the unanimous expectations of Wall Street analysts. However, due to the Iran war leading to a complete interruption of goods and trade transport in the Persian Gulf region and paper losses from hedge trading activities, unadjusted profits fell to the lowest level in five years. Exxon Mobil Corporation's first quarter performance report showed that the adjusted earnings per share for the first three months of this year was $1.16, higher than the analysts' consensus expectation of $1.00 compiled by LSEG. Benefiting from the high oil prices that saw Brent crude oil surge 50% in a single quarter, including upstream operations, the upstream business saw a 63% increase in quarter-over-quarter in Q1. The adjusted data excluded $700 million in operating losses, which came from goods that were unable to be delivered due to the unprecedented energy market supply interruptions caused by the political conflicts in the Middle East GEO Group Inc starting at the end of February. If the negative impact of financial derivatives that occurred in the short term is also excluded, earnings per share would be approximately $2.09, and the first quarter net profit indicator would be $4.2 billion, significantly lower than the $7.7 billion in the same period in 2025, and the lowest since the first quarter of 2021. The company's first-quarter total revenue was approximately $85.138 billion, higher than the $83.130 billion in the same period last year. GAAP net profit was $4.183 billion, a significant decrease from $7.713 billion in the same period last year. In addition, Exxon's first-quarter free cash flow indicator was approximately $2.7 billion, far below the $8.8 billion in the same period last year, highlighting the impact of a 20% business exposure to Middle Eastern partners, resulting in actual operations and production being hit by the closure of the Strait of Hormuz and Iranian missile attacks. The company paid out $4.3 billion in dividends in the first quarter and repurchased $4.9 billion worth of stock. Capital expenditures for the quarter totaled $6.2 billion, in line with the company's full-year guidance. Strong growth from high oil prices The U.S. oil and gas major benefited from a significant increase in oil and natural gas trading prices, as well as increased production from its major assets in the Permian Basin and Guyana, which helped offset the production and supply chain disruptions in the Middle East region. Exxon Mobil Corporation's CEO Darren Woods said in a statement that the company is stronger than a few years ago, but the "Middle East events have undoubtedly tested this strength, and it has withstood the test." The political conflicts in the Middle East GEO Group Inc have pushed international oil prices to rise sharply to over $110 per barrel, but the impact on oil giants' profits is not uniform. The Iran conflict that erupted on February 28 severely disrupted the global energy market. Shipping in the Strait of Hormuz almost came to a standstill, leading to supply shortages and driving up oil prices, causing the international oil price benchmark for the first quarterBrent crude oil futures prices to rise by 50%. Exxon Mobil Corporation previously disclosed impacts of several billion dollars from timing effects/forward effects and expected these impacts to be completely reversed in subsequent quarters; in contrast, BP p.l.c. sponsored ADR giant BP (BP.US) saw a significant increase in operating profit this week, driven by its oil trading business. Exxon Mobil Corporation uses financial derivatives to mitigate the risks of price volatility during the time required to deliver goods to customers. The company stated that the overall value of physical goods would not be reflected in profit indicators until the transaction was completed, resulting in timing effects. Exxon's CFO Neil Hansen said in a media interview, "Generally, it takes a few months to reverse this." However, he added that it is difficult to predict the possibility of further time effects, which will depend on how commodity market prices change. Profit from upstream operations, including identified operating projects, was approximately $5.7 billion, a significant increase of 63% from the previous quarter but a 15% decrease from the same period last year. The downstream performance recorded a loss of $1.3 billion, compared to a profit of $827 million in the same period last year. Exxon stated that after excluding all timing effects, downstream profit was approximately $2.8 billion. High exposure to the Middle East remains Hansen stated that Exxon Mobil Corporation's core business is resilient and that excluding all timing/forward effects and impacts from undelivered goods, net profit increased compared to the previous year. Exxon Mobil Corporation has around 20% of its oil and gas production located in Middle Eastern partners, meaning it has one of the highest exposure ratios among its competitors in the North American market. The U.S.'s second largest oil producer Chevron Corporation (CVX.US) stated in its earnings release on Friday that less than 5% of its production comes from this region. Exxon stated that if the Strait of Hormuz remained closed throughout the entire second quarter, compared to last year, this would lead to a significant reduction of 750,000 barrels per day in production in the Middle East region. Exxon stated in a regulatory filing earlier this month that the interruption caused by this round of Iran wars led to a significant 6% decrease in production in the first quarter compared to the previous three months. The oil and gas major's equity in two mega-scale liquefied natural gas facilities in Qatar, all of which were hit by Iranian missile attacks, leading to a substantial reduction in production expectations. Exxon's most important upstream assets are in the Permian Basin and offshore Guyana. Hansen said that production in Guyana set a new record, while the company continued to achieve unexpected growth in the Permian Basin.