By Shariq Khan

NEW YORK (Reuters) – U.S. oil producers Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) reported better-than-expected third-quarter profits on Friday, outperforming their European rivals as record high oil production mitigated the impact of declining fuel margins.

Both companies focused on expanding oil and gas production while competitors like BP (NYSE:BP) and Shell (LON:SHEL) invested heavily in wind, solar, and renewables that have yet to yield significant returns. Furthermore, both U.S. firms have profited from acquiring smaller oil producers.

However, their increasing production may soon confront challenges due to uncertain demand, particularly in leading oil importer China, alongside the possibility of OPEC lifting production cuts as early as next month. OPEC is anticipated to postpone a plan to increase output by 180,000 barrels per day due to concerns over weak demand and oversupply.

Exxon achieved a record output of 4.6 million barrels of oil equivalent per day (boepd) in the third quarter, reflecting a 24% year-on-year increase, with its $60 billion investment in Pioneer Natural Resources (NYSE:PXD) and the acquisition of Denbury yielding positive results.

Chevron, facing delays with its $53 billion takeover of Hess (NYSE:HES), saw a 14% rise in third-quarter production to a record 1.61 million boepd, primarily due to its U.S. shale operations. The company added a drilling rig in the Permian basin last quarter and plans to expand production in Kazakhstan next quarter.

Despite their achievements, both firms registered lower profits compared to last year due to weak global refining margins, which also impacted BP and TotalEnergies (EPA:TTEF). Exxon's third-quarter profits fell by 5% year-on-year, while Chevron's decreased by 21%.

These declines were less severe than Wall Street anticipated and were more favorable than those of leading European competitors. For instance, BP announced a 30% profit decline this week, and TotalEnergies reported a 37% drop in adjusted net income.

Exxon reported profits of $1.92 per share, surpassing Wall Street's forecast by four cents, while Chevron's adjusted income of $2.51 per share exceeded analysts' average estimate of $2.42, according to LSEG data. Both companies' shares rose nearly 2% in pre-market trading.

Both produced record volumes of oil and gas from the Permian Basin, the top U.S. shale field, with Exxon's output hitting a high of 1.4 million boepd.

Exxon plans to continue its aggressive growth strategy. "We see tremendous opportunities to invest in profitable growth in both our existing and new businesses," stated finance chief Kathryn Mikells.

Chevron also reported a 22% rise in Permian production to a record 950,000 boepd, aided by last year’s acquisition of PDC Energy (NASDAQ:PDCE), and is on track to reach 1 million boepd in the field next year.