Higher oil prices have enabled big oil giants Chevron (CVX 0.41%) and Exxon (XOM -0.69%) to post surging profits and cash flow during the first half of this year. Brent crude, the global benchmark, spiked from less than $80 a barrel to start the year to more than $120 following Russia's invasion of Ukraine. It remained in the triple digits through most of the summer, enabling oil companies to cash in on higher crude prices. 

While oil prices have cooled off considerably in recent months -- Brent has recently been in the low $90s -- that didn't stop Exxon and Chevron from posting record third-quarter results. Instead of oil, natural gas fueled their quarter, showcasing the benefits of their integrated business model. 

Record natural gas prices fueled Exxon's record-breaking quarter

Exxon reported a record profit of $19.7 billion in the third quarter. That's up 10% from the all-time high it set last quarter. The big driver was record natural gas prices in the period. That enabled Exxon to sell its gas for 172% more than it did in the year-ago period, helping offset lower oil prices compared to the second quarter. 

Exxon also benefited from higher production. The oil and gas giant produced an average of 3.7 million barrels of oil equivalent per day (BOE/D) in the quarter. That was 50,000 BOE/D higher than the second quarter after accounting for asset sales and its exit from Russia.

Exxon also capitalized on the strong demand for refined petroleum products. It refined the most oil ever in its North American operations, and its highest total globally since 2008.  

The energy giant positioned itself to capitalize on higher natural gas prices by continuing to invest in expanding its production throughout the pandemic. Those investments are now paying off, as they allowed the company to increase its output this year and cash in on higher prices.

Exxon generated a total of $22 billion of free cash flow in the third quarter alone, giving it the funds to invest in growing its traditional and lower-carbon energy businesses, reduce debt, and return cash to shareholders via dividends and repurchases. And the company recently announced its 40th consecutive annual dividend increase, enabling the energy giant to maintain its Dividend Aristocrat status.

A near record fueled by natural gas

Chevron reported $11.2 billion of profit in the third quarter, about 3% lower than the record high it set in the second quarter. However, the company recorded about $600 million in charges. Chevron's profits would have set a new all-time high without those charges. Meanwhile, cash flow from operations reached a record high of $15.3 billion in the period. 

Natural gas was a big profit driver for Chevron in the quarter. The company sold natural gas produced in the U.S. at $7.05 per thousand cubic feet in the quarter, up from $3.25 per thousand cubic feet in the year-ago period. Meanwhile, it realized $10.36 per thousand cubic feet of gas sold internationally, up from $6.28 in the year-ago quarter. 

Chevron also benefited from its investments to boost production. While its U.S. gas production was flat year over year -- though its total output increased by 49,000 BOE/D -- it expanded its international gas output by 4%.

Chevron's record cash flow gave it more money to allocate to create value for shareholders. Like Exxon, the company has continued to grow its dividend and maintain its Dividend Aristocrat status. It's also investing in expanding its new and traditional energy businesses (capital spending has increased 50% this year), repaying debt, and buying back stock. Chevron's balanced approach should enable it to continue supplying the world with the energy it needs today while helping transition to a lower-carbon future.

Integration pays off

The integrated business models of Exxon and Chevron give them a competitive advantage over their more focused rivals because they don't need higher oil prices to thrive. That was evident in the third quarter as they offset lower oil prices by capitalizing on surging gas prices to report record results.

All this makes them more well-rounded energy companies and potentially better long-term investments, especially with their transitions to lower-carbon energy sources. That could enable them to continue generating strong profits and cash flow for investors, even as the economy shifts to cleaner fuel sources.