ExxonMobil Corp. and Royal Dutch Shell plc reported sharply lower earnings in the first quarter, with the decline in oil prices removing billions from both of the oil majors’ bottom lines. However, their integrated business models helped them blow past Wall Street consensus.

ExxonMobil earned $4.9 billion ($1.17/share) in 1Q2015, 46% below year-ago profits of $9.1 billion ($2.10). The quarterly profits were the lowest in six years, as lower oil and gas prices struck at the heart of earnings. Lower liquids and gas realizations by themselves decreased earnings by $5.5 billion.

However profits still managed to trump Street estimates by around 40%.

It’s the fundamentals keeping ExxonMobil functioning above expectations, investor relations chief Jeff Woodbury told analysts on Thursday during a conference call.

“Regardless of whether we’re in a high-price cycle or in the lower price cycle we’re in right now, the organization has remained focused on fundamentals,” he said. “You’ve heard us say before that we’re price takers. We’re really focused on those things we can control, such as costs…reliability, productivity, and it’s how we structure the organization in the most efficient way.

“I can tell you we are very well positioned…and also well poised when we get into a downcycle like this…Given our financial capability, we’re also able to make investments in the cycle and capture lower costs through the cycle…”

As one analyst observed, if ExxonMobil and its super major brethren are able to overcome the 50% plunge in oil prices, lower for longer is looking much more likely.

The Irving, TX-based producer is making headway on improving internal efficiencies and it also is negotiating for better prices with vendors.

“Across our spend, we’re actively engaged with various service providers,” said Woodbury. “We’re making progress in capital savings in raw materials, rig rates…construction costs” and are “focused on capturing the lowest life cycle costs.” With ExxonMobil’s heft, “it really does advantage us from managing from a global perspective.”

Upstream earnings fell sharply to $2.9 billion from almost $8 billion in 1Q2014. Most of the earnings were from the international business, with U.S. exploration and production generating a loss of $52 million versus a profit of $1.3 billion in 1Q2014.

In part because of project startups, including Hadrian South in the deepwater Gulf of Mexico, upstream volumes were 2.3% higher year/year, with liquids up 6% to 2.3 million b/d. Natural gas production declined to 11.8 Bcf/d, down 188 MMcf/d. Gains in output partially were offset by normal field decline and maintenance.

U.S. oil and gas production climbed from a year ago to 472,000 boe/d net  from 442,000 boe/d and was nearly flat from the fourth quarter. In the United States, ExxonMobil produced 3,220 Mcf/d of gas in 1Q2015, versus 3,412 Mcf/d in 1Q2014 and 3,371 Mcf/d sequentially. Total global gas production fell year/year to 11,828 Mcf/d from 12,016 Mcf/d.

Average realized U.S. gas prices between January and March were $2.53/Mcf in 1Q2015, versus $3.73 in 4Q2014 and $4.78 in the year-ago period. U.S. crude oil realizations averaged $42.20/bbl, compared to $63.30 in 4Q2014 and $93.18 a year ago.

Upstream spending in the United States during 1Q2015 was higher year/year at $2.12 billion from $2.09 billion, but down from 4Q2014 spending of $2.35 billion.

Lower commodity prices led to lower capital spending. ExxonMobil’s expenditures fell 9% to $7.7 billion in 1Q2015, in line with the forecast. Cash flow from operations totaled $8.5 billion, enough to cover the quarter’s capital expenditures.

CEO Rex Tillerson, who didn’t participate in the call, said at IHS CERAWeek in April and earlier this year that he expects low oil prices to be around for at least the next two years (see Daily GPI, April 21; March 4).

In light of lower prices, ExxonMobil has reduced 2015 capital spending by about $2 billion to $33 billion, similar to a cut in spending also announced by Shell on Thursday. Earlier this year each of the oil majors had set budgets at $35 billion. However, ExxonMobil hiked its dividend for the second quarter by 5.8% (73 cents/share) even with industry turmoil. Shell has chosen to maintain its dividend at 47 cents/share.

Shell, like ExxonMobil, posted a huge decline in profits in the first quarter, down 56% year/year to $3.2 billion ($1.02/share), while revenues dropped by 40% to $67.5 billion. Profits from producing oil and gas plunged to $657 million in 1Q2015, versus $5.7 billion a year ago. The realized price for oil was 52% lower year/year, while the price of natural gas dropped by 27%, which together resulted in $4.7 billion lost from bottom line profits.

However, Shell also beat a consensus estimate of $2.5 billion. The integrated model also provided more control, CFO Simon Henry said in a separate earnings conference call.

Upstream volumes averaged 3.17 million boe/d, 2.4% lower than a year ago.

The integrated gas division, which includes liquefied natural gas projects, didn’t help, with profits slumping to $1.2 billion from $3.3 billion. Shell also struggled in the Americas, where it lost $1.1 billion from a year ago on low unconventional gas prices in the United States. Costs to prep for possibly drilling in Alaska’s Chukchi Sea this summer also contributed to the decline.

“A small armada” of ships, including two drilling rigs, is being readied for Alaska, even though drilling permits haven’t been approved, Henry said. The window to drill in Alaska’s offshore during the summer is short because of icy conditions.

Even with the plunge in profits, there’s no major changes, other than a cut to spending, that would impact Shell’s strategic priorities, Henry told analysts.

“We are driving improvement throughout the company,” as it has been doing for the past couple of years. He said the “market for asset sales is difficult,” and Shell has little money to invest in anything new since making an offer to buy UK-based BG Group plc (see Daily GPI, April 8). With the transaction unlikely to be completed until sometime in 2016, Henry offered no new information.

CEO Ben van Beurden, who participated briefly in the conference call, said “in what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance by redoubling our efforts to drive a sharper focus on the bottom line in Shell.” Part of the focus is to continue selling nonstrategic assets. So far this year, more than $2 billion worth has been sold.

“In parallel we continue to reduce our operating costs and capital spending; and by deferring and reshaping new projects, we can achieve further efficiencies and savings in the global supply chain.”

Some final investment decisions have been “pushed out,” Henry said. Shell reduced its unconventional spending in North America by 20% this year and the onshore still appears to hold no allure. However, the deepwater GOM, where Shell is a leading operator, may see more spend this year. More than once, Henry said the Appomattox project was at the top of the final investment decision (FID) list.

Appomattox is a $20 billion project, which would offer high cash margin and much more production versus an unconventional play, van Beurden said in January (see Daily GPI, Jan. 29; Sept. 9, 2014; April 29, 2011).

Also high on the FID list is Vito, another deepwater GOM project, which Shell would operate (55%) with partners Anadarko Petroleum Corp. (20%) and Statoil ASA (25%). Anadarko made the Mississippi Canyon Block 984 discovery in 2009.