What does this chart tell us because anyone can see clear differentiations in the earnings reported by both companies? First of all, XOM clearly has superior upstream operations that allow them to make profits even during a slump. This will be crucial for ensuring that cash flow is available for reinvestment in times of financial discipline, and also provide hopes for investors looking to take a position in their stock. In fact, Exxon still has the option to continue expanding upstream production until they reach a break-even point which may be continually pushed farther away as costs are constantly reduced. This is the advantage of established infrastructure, a decrease of marginal cost because of economies of scale. Chevron, on the other hand, has shown that their upstream operations are not in control of price crises as exploration and production actually cost them the grand scheme of things. Nevertheless, their upstream operations can be maintained as long as profitable downstream operations compensate for the significant losses that are to come on the other side, and this seems plausible as fuel prices remain stable and refuse to move with crude. That brings me to a second point, even though CVX has shown an underperformance in its upstream sector, it should have strong enough downstream control that will capture profits no matter what. Everyone needs fuel. As the financial world chugs along, both companies should still be looking to maintain a desire to post consistent earnings results. If the slump lasts longer than a year (and it very well could per some experts), oil companies will need the support of shareholders to hold that stock price high. Posting consistent returns and grinding out margins by cutting out the extra fat in a company's operations is the way to stay disciplined in a drought. The feast comes later. As of now, I really like XOM's ability to sustain profits and its likelihood of efficiently cutting costs against other oil companies. Although the outlook for their stock is bearish in the short term, I see a bullish wave establishing them as the profitable giant after Q3 earnings come out. CVX is interesting because an initial bearish sentiment has them as losing in the big oil arena, but their stable downstream operations will allow them to secure more revenue on that end. In the long run, I'm a bull as they should be in the best position to capitalize on windfall profits when the downward pressure is lifted off of crude oil prices.
The numbers and data come from earnings material released by Exxon and Chevron on their investor relations pages: