Put a Kitten in Your Tank: Big Oil Gets Less Bold -- Heard on the Street

"Big Oil," the moniker attached to the giant, multinational energy companies, is slightly less apt than it was a year ago even as the industry's financial fortunes have improved.

Exxon Mobil Corp. and Chevron Corp. reported first-quarter earnings on Friday that, collectively, were $5.6 billion, or 416%, higher than a year earlier, driven by a big rise in crude prices. But they were both less oily and less international than in the past.

Crude output fell at both companies, reflecting a major retrenchment in capital expenditures and a greater reliance on natural gas. Overall hydrocarbon production was down for Exxon and roughly flat for Chevron, but both companies only saw growth domestically, largely from shale formations.

The change reflects a deliberate shift in strategy. While neither company has abandoned mammoth, technically challenging international projects, unconventional U.S. production is attracting more of their money even as overall spending has plunged.

The key attraction of doing this is the much lower exploration, political and financial risk since there are no dry holes, a capricious government won't nationalize fields and the investment spigot can be turned off if commodity prices tumble. The downside is that much smaller companies can do the same thing, often with less financial discipline.

For now the news is good for both Exxon and Chevron. They are finally generating enough cash to rebuild their weakened balance sheets and to perhaps resume their once-prodigious share buybacks. In the longer run, though, big oil's resemblance to small shale may mean skimpier returns across the next cycle.

Write to Spencer Jakab at spencer.jakab@wsj.com

(END) Dow Jones Newswires

April 28, 2017 13:18 ET (17:18 GMT)