Texas: the quarter the refiners took

Texas, October 2026

Twenty seven Texas companies reported third quarter results in the last eight days. Read together they describe a state running two economies at once. One of them is having the best quarter in its history. The other is waiting on a mortgage rate.

The first economy runs on $100 oil, a 5 percent 10 year Treasury, and a grid that cannot add power fast enough. Its companies raised guidance this week, bought back stock, and told analysts their next three years are already signed. The second economy builds houses and the things that go in them. Its companies cut guidance, flagged cancellations, and said incentives will stay high into 2027. Both economies sit in the same counties, sometimes on the same road. This piece reads the week's releases one group at a time and then asks what the split means for the markets this publication covers.

The quarter in one table

Every figure above is from the company's own release. The groupings below are ours.

Energy: the refiners took the quarter

The five refiners based in Texas earned about $42 billion between them in three months, and roughly $28 billion of that came from the refining segments alone. ExxonMobil's Energy Products segment, which is mostly refining, earned $9.1 billion on an adjusted basis against $1.8 billion a year ago. Chevron's US downstream earned $3.6 billion against $638 million. Valero earned $6.8 billion, the most in any quarter of its history, on a refining margin of $39.24 a barrel. Phillips 66 earned $5.6 billion on $38.00 a barrel, up from $24.08 one quarter earlier. HF Sinclair, the smallest of the five, earned $2.0 billion on a margin of $54.22 a barrel against $19.16 a year ago.

The mechanism is the same at all five. A refiner buys crude and sells gasoline, diesel, and jet fuel. Crude has been above $100 since the Iran crisis began and Brent touched a six month high last week, but the products rose faster than the crude did, because the ships that carry Middle East products to Europe and Asia have been rerouted or held, and the Gulf Coast is the closest large refining complex to the gap. ExxonMobil ran its Gulf Coast refineries at 100 percent of crude capacity and produced the second most diesel in its Gulf Coast history. Chevron ran US refineries at about 98 percent with record crude inputs of 1.09 million barrels a day. Phillips 66 pushed diesel yield to 41 percent of every barrel, a record for the company, because diesel was the product paying the most.

This is a Texas story more than an American one. The plants are in Baytown, Beaumont, Port Arthur, Pasadena, Texas City, Corpus Christi, and Sweeny, and the earnings are booked in Spring, Houston, San Antonio, and Dallas. The money does not stay entirely in those cities, since most of it went out as buybacks and dividends, but the payroll, the turnaround contractors, the severance tax on the crude, and the sales tax on everything the refinery towns buy stays here.

The upstream side was strong without being extraordinary. ExxonMobil produced 4.5 million oil equivalent barrels a day and said Permian and Golden Pass LNG volumes drove its growth for the year. Chevron produced just under 4.0 million, with US production above 2 million for a fifth straight quarter and the Permian above 1 million for a sixth. Both cut Permian spending from a year ago and both said they are producing more with fewer rigs. ExxonMobil has three automated rigs working in the Permian and plans to make them a quarter of its fleet next year and half the year after. That is a sentence the drilling contractors in Houston should read twice.

Cheniere, which liquefies gas at Sabine Pass and Corpus Christi and ships it, grew revenue 39 percent to $6.2 billion and shipped 188 cargoes against 163 a year ago. It raised full year guidance by about $850 million at the midpoint. The seventh midscale train at Corpus Christi finished in August and added more than 20 percent to that site's capacity. The federal review of the Corpus Christi expansion reached draft stage in September, which is the gate for the next round of trains.

The service companies: the cycle is turning, slowly

The companies that sell equipment and services to the producers had a different quarter from the producers themselves, and the difference is the lag.

NOV, the largest drilling equipment maker in the world, booked $577 million of new orders against $632 million shipped from backlog, a book to bill of 91 percent. That is up from 74 percent one quarter earlier and still below the 100 percent that would mean the order book is growing. Backlog is $3.98 billion. NOV guided fourth quarter revenue flat with a year ago and said Middle East activity would moderate. Patterson UTI averaged 101 rigs in the US and exited the quarter at 104, with more reactivations expected in the first quarter of 2027. TechnipFMC, which builds the subsea systems for offshore fields, ran a 23.5 percent subsea margin and raised guidance for this year and next, but its inbound orders fell to $2.3 billion from $2.6 billion and its backlog shrank 4 percent. Management says $14.5 billion of subsea awards are coming in the next five quarters. Noble, the offshore driller in Sugar Land, lost $117 million in the quarter, signed $560 million of new contracts, and put the turn in its business in the second half of 2027, when the rigs it just contracted actually start work.

Read together, these four say that $100 oil has not yet turned into a drilling boom. The producers are spending less per barrel and letting the price flow to the balance sheet. The equipment and service companies are seeing the first orders and the first reactivations, and they are guiding to a better 2027 rather than a better fourth quarter. Hess Midstream, which gathers Bakken crude and gas rather than Permian, reported volumes down on every line and is the one energy name on the list where the direction was clearly down.

Power and the grid

Quanta Services builds transmission lines, substations, and the electrical work inside data centers. Its revenue grew 57 percent to $12.0 billion, its backlog reached $63.7 billion, up from $39.2 billion a year ago, and it raised full year revenue guidance by $2 billion. That is the single largest number on this list in terms of what it says about the next three years. A $63.7 billion backlog at Quanta's current run rate is about five quarters of work already contracted, most of it electric, and the company said the pipeline behind the backlog is larger than the backlog.

CenterPoint Energy, which owns the wires in Houston, raised its ten year capital plan by $4 billion to $70.7 billion and said its rate base will grow more than 14 percent a year through 2030. It raised 2026 earnings guidance and set 2027 guidance about 9 percent higher. It also said that higher financing costs took four cents a share out of the quarter, which is what a 5 percent 10 year does to a company that borrows to build. The company's answer to the question of who pays for $70.7 billion of wires is that large load growth spreads fixed costs across more kilowatt hours. That answer depends on the data centers in the Texas interconnection queue actually being built and energized, and the state's audit of that queue is due December 10.

KBR's engineering and technology side, which includes LNG and ammonia plant design, grew 26 percent while its government services side shrank 5 percent. The company splits into two in January.

Housing: the buyer at 7 percent

D.R. Horton, based in Arlington and the largest homebuilder in the country, reported fiscal fourth quarter orders down 7 percent, a cancellation rate of 23 percent against 20 percent a year ago, and closings down 2 percent. Its backlog rose 9 percent because fewer of the houses it sold in the spring have closed. It guided fiscal 2027 closings to 79,000 to 84,000, below this year, and said incentives will stay elevated. The executive chairman's words were that market conditions became more challenging during the quarter.

Builders FirstSource, the Irving supplier of lumber, trusses, and millwork to the builders, saw single family sales fall 6 percent, gross margin fall 260 basis points, and net debt rise to 4.1 times earnings from 2.3 times a year ago, mostly because earnings fell. It narrowed guidance and built it on an assumption that single family starts fall mid to high single digits next year. Lennox, the Richardson maker of residential air conditioning, cut full year guidance for the third time this year. Its residential segment profit fell 18 percent on a margin down 490 basis points while its commercial segment grew 24 percent.

The exception is CSW Industrials in Dallas, which sells HVAC and plumbing products to contractors and grew revenue 30 percent, 10 percent of it organic, with free cash flow up 57 percent. CSW sells into repair and replacement as much as new construction, and the quarter says the existing housing stock is being maintained even while new construction slows. Lennox's split, residential down and commercial up, says the same thing from the other side.

The number underneath all of this is the mortgage rate. The 30 year sat at 7.03 percent in the Texas Real Estate Research Center's October reading. The 10 year Treasury touched 5.00 percent this week for the first time since 2007 and the Federal Reserve held its rate on Wednesday with two officials voting to raise it. The statewide median home price was $333,628 in the third quarter, down 0.4 percent from a year ago, with 5.5 months of inventory, per Texas Realtors. A builder facing that buyer has two choices, cut the price or pay the buyer's rate down, and every builder on this list chose the second. Incentives are a price cut that does not show up in the median.

Freight, trucks, and barges: the cycle turned where fewer people were looking

Trinity Industries in Dallas took orders for 2,190 railcars in the quarter against 350 a year ago. Deliveries rose to 2,030 from 1,680. Its lease fleet is 97 percent utilized and renewals are pricing 4.1 percent above expiring leases. One quarter of orders is not a trend, and Trinity's own earnings fell because its leasing margin compressed, but an order book that grows sixfold in a year is the first sign the freight equipment cycle has turned.

Rush Enterprises in New Braunfels, the largest commercial truck dealer in the country, sold 3,880 new Class 8 trucks in the quarter, up 24 percent, and said its backlog points to strong deliveries through the first quarter of 2027, with the caveat that customers slowed new orders while they wait on the final 2027 federal emissions rule. Kirby in Houston, which runs the largest inland barge fleet in the country, grew earnings per share 27 percent with inland barges in the low 90 percent utilization range and spot rates rising, and raised its full year outlook to the upper end of its range. Kirby's distribution business, which services engines and builds power generation equipment, grew operating income 13 percent, and the company said order activity in power generation is strengthening, which puts Kirby on both sides of this week's story.

Group 1 Automotive in Houston, the car dealer, sold 8.5 percent fewer used vehicles on a same store basis and saw new vehicle gross profit per unit fall 4.4 percent. Its parts and service business grew 2 percent. That is the household, not the business, and it matches what the builders said: the consumer is maintaining what they own and buying less of what is new.

WM, the Houston waste company, is the closest thing on this list to a direct read on the Texas economy with no lag, because trash volume tracks activity the week it happens. Collection and disposal volume fell 0.4 percent. Management attributes it to shedding low margin residential routes and lost national accounts rather than to industrial customers, and the energy surcharge line was up, which is what $100 diesel does to a fleet of trucks. Price rose 5.8 percent and carried the quarter.

Banks and hospitals: the Texas household

Cullen/Frost, the San Antonio bank, grew average loans 9 percent and average deposits 3.6 percent, held its net interest margin at 3.78 percent, and beat consensus. Nonaccrual loans fell by half from the prior quarter. Prosperity Bancshares in Houston closed the Stellar merger on July 1 and reported loans up 45 percent and deposits up 48 percent from a year ago on the acquisitions, with the margin at 3.73 percent and no provision for credit losses. Neither bank reported a credit problem. Both are growing loans faster than deposits, which means the cost of deposits is the number to watch in both next quarter.

Tenet Healthcare in Dallas reported same hospital admissions up 2.8 percent and its ambulatory surgery business growing revenue 7.5 percent at a 39 percent margin, against 19 percent for the hospitals. It raised full year guidance. People are getting surgery, and more of it is happening outside hospitals. Tyler Technologies in Plano, which sells software to counties and cities, grew SaaS revenue 21 percent and trimmed the top of its revenue range by $10 million, in part because a Texas state payments contract is winding down.

What the split means for the counties

Our county pieces read Texas one market at a time, and this week's releases land on those counties unevenly.

Harris County and the Ship Channel had the quarter of the decade. Three of the five refiners are headquartered in Harris County and the plants line the Ship Channel and the coast east and south of it, and most of the quarter's $28 billion of refining earnings was made there. Quanta, Kirby, KBR, NOV, Patterson UTI, and CenterPoint are all Houston companies, and five of the six raised guidance or their outlook. The one Houston company that cut, Group 1 Automotive, sells cars to the household. Houston's problem this year has been housing inventory, with two sellers for every buyer in the suburbs, and nothing this week changes that. But the industrial economy that pays Houston's wages reported the best quarter it has had since 2022, and payroll leads housing by a year or more.

Travis and Williamson counties got the housing news with no offsetting energy news. Austin permits are down 13.6 percent this year, Travis County prices are down more than a fifth from the 2022 peak, and this week D.R. Horton and Builders FirstSource both said the national builder is pulling back on starts and raising incentives. Williamson, which took Austin's overflow during the boom, is the county where that shows first because the builders own more lots there. The one piece of good news for the Austin market is indirect: Quanta and CenterPoint are describing a Texas power buildout whose data centers include sites in Williamson County, and that is construction payroll even when the houses are not selling.

Dallas and Collin counties are split down the middle. HF Sinclair, Trinity, Tenet, and CSW had strong quarters. Lennox cut guidance for a third time and Builders FirstSource, in Irving, saw single family sales fall 6 percent. The Dallas metro has the deepest builder lot pipeline in the state and the most exposure to the incentive math.

Cameron and Nueces counties on the coast have the LNG story. Cheniere's Corpus Christi expansion is the largest industrial project under construction on the Texas coast, and the company raised guidance this week. The housing in those counties is cheap by Texas standards and was never overbuilt, so the energy upside arrives without the housing downside.

Bexar County got Valero's record quarter and Cullen/Frost's clean one, and San Antonio housing never ran in the boom, so it has less to give back.

What we would want to see

• NOV's book to bill above 100 percent and Patterson UTI's rig count above 110 by the first quarter report, which would confirm that $100 oil has reached the equipment makers.
• D.R. Horton's incentive spending falling quarter over quarter for the first time, which would mark the point where the builders stopped paying the buyer's rate down.
• Quanta's backlog holding above $60 billion through the ERCOT audit filing on December 10, since a large share of that backlog is Texas power work that depends on the data centers in the queue being real.
• The 10 year Treasury back below 4.5 percent, which is the level at which a 30 year mortgage comes back to the mid 6s and the Texas buyer comes back without incentives.
• A second quarter of railcar orders above 1,500 at Trinity, which would turn one quarter into a cycle.
• Refining margins at Valero and Phillips 66 above $25 a barrel in the fourth quarter after the Iran risk comes out of the crude price, which would show the Gulf Coast advantage is structural and not a crisis dividend.

The plain read of this week is that Texas is not one economy and has not been one for some time. The energy, power, and freight economy had its best quarter in years and told the Street the next three years are booked. The housing economy is waiting on a mortgage rate that the bond market, not the builders, controls. The two share counties, payrolls, and tax bases, and the first one pays for a great deal of the second. If the week's results hold, the counties with both an industrial base and a cheap housing stock, Harris, Nueces, Cameron, and Bexar, are the ones we would look at, and the counties with a builder lot pipeline and no refinery, Williamson first among them, are the ones where we would wait.

This piece is impersonal general commentary for a general readership and is not individualized advice. Old San Jacinto LLC and the author hold no position in any company named in this piece. Every figure is from the named company's own release for the quarter ended September 30, 2026, except where another source is named.