Key Highlights

● Exxon shares were up about 2% pre-market after third-quarter results beat expectations.

● Energy Products earned $9.05 billion on an adjusted basis, topping upstream's $7.31 billion.

● Exxon returned $9.4 billion to shareholders and outlined a $20 billion buyback plan for 2027.

● Brent near $117.80 and Hormuz tensions support refining margins but could reverse quickly.

Exxon Mobil (NYSE:XOM) is one of the few Large-Cap Stocks moving higher this morning. Shares were up 2.09% in pre-market trading in a 7:41 a.m. ET market update, after the oil major reported third-quarter results that beat analyst expectations. Another market update had the stock up 1.79% earlier in the morning.

The surprise wasn't oil production. It was refining. One report noted that Exxon is "earning more from refining than from Upstream production for the first time in at least six years."

Inside the quarter

Exxon reported GAAP Earnings of $15.41 billion, or $3.72 a share, in its release on Friday at 6:30 a.m. ET. Excluding identified items, earnings were $17.51 billion, or $4.23 a share. A pre-week consensus compiled by an earnings calendar stood at $3.96 a share, though it did not specify whether that figure was GAAP or adjusted.

The segment breakdown tells the story. Energy Products, which covers refining and fuels, earned $9.05 billion on an adjusted basis, up from $4.10 billion in the second quarter. Upstream adjusted earnings fell to $7.31 billion from $9.19 billion, which Exxon attributed to lower realized prices and an accelerated Guyana entitlement effect. Chemical Products weakened on falling margins, while Specialty Products improved on higher basestock margins.

Exxon said its U.S. Gulf Coast refineries ran at 100% crude unit utilization and that diesel output was its second-highest on record. CEO Darren Woods said the Beaumont refinery expansion has "contributed to an increase in our distillate production," and added: "We're increasing production while improving efficiency."

Cash returns and the oil backdrop

The quarter produced plenty of cash. Operating Cash Flow was $25.65 billion and free cash flow was $19.11 billion. Exxon returned $9.4 billion to shareholders, split between $4.3 billion in dividends and $5.1 billion in buybacks, declared a $1.07 quarterly Dividend and outlined a $20 billion buyback plan for 2027.

Upstream volumes were about flat at 4.496 million oil-equivalent barrels a day, compared with 4.514 million in the second quarter. Exxon said Guyana has now produced a cumulative 1 billion barrels.

The macro backdrop favors energy. West Texas Intermediate crude traded around $104 a barrel and Brent near $117.80 early Friday, according to market data, after a reported attack on a tanker in the Strait of Hormuz. Brent is up about 12% in October. High crude prices and tight fuel markets tend to lift refining margins, which helps explain this quarter's mix.

Exxon is a heavyweight in the S&P 500 energy sector, and its gains, together with Chevron (NYSE:CVX)'s, are offsetting part of the tech sell-off. S&P 500 futures were down about 1.1% before the open, while Dow futures were roughly flat, helped by the energy majors and rotation into health care.

Risks and what to watch next

Refining margins swing quickly. A ceasefire or easing in Hormuz tensions could cut crude and fuel prices, and Exxon's own disclosures show about $2.5 billion in negative timing effects in the quarter, a reminder that reported earnings can bounce between periods. Weaker chemical margins also point to soft industrial demand.

On the positive side, Exxon is producing strong free cash flow, keeping Buybacks large and showing that its refining system can outperform when Supply is tight.

At the open, watch whether Exxon holds its gains as the broader market weakens and whether Chevron, which also beat, keeps pace. Oil prices and any Hormuz headlines will set the tone for energy stocks through the day. Next week's U.S. jobs report on Friday and Tuesday's midterm elections are the next macro catalysts, and Exxon's fourth-quarter report has not yet been scheduled.