Exxon Mobil, Chevron earnings take significant hit from lower oil prices
Exxon's results mirrored weaker results at rivals BP Plc and Royal Dutch Shell
Exxon Mobil Corp's third-quarter profit nearly halved, hit by lower oil prices and weaker margins in refining and chemicals, with its three major business reporting lower year-over-year profit.
Earnings fell to $3.17 billion US, or 75 cents per share, in the quarter, from $6.24 billion, or $1.46 per share, a year earlier, the company reported on Friday.
It beat analysts' recently reduced expectations for earnings of 67 cents per share. The company last month warned of weaker chemicals results and lower oil prices, prompting analysts to reduce estimates from 86 cents per share.
"Maybe expectations were a little bit weak going in, but I think overall it is probably slightly negative relative to expectation," said Anish Kapadia, director of energy at London-based Palissy Advisors.
Analysts at Tudor, Pickering, Holt & Co called Friday's results "neutral for the stock."
Exxon shares were up 1.3 per cent in early trading on Friday.
Cash flow concern
Exxon's results mirrored weaker earnings at rivals BP Plc and Royal Dutch Shell, which earlier this week indicated they might delay dividend increases or a buyback program because of low prices.
Chevron Corp on Friday reported a 36 per cent drop in third-quarter profit. Prices have fallen for oil and gas as U.S. shale producers keep pumping more oil amid slowing global consumption growth.
Exxon has been investing in major projects to boost production at a time when investors have been pressing oil companies to cut spending and increase returns to shareholders. It spent $7.7 billion in the third quarter, up from $6.6 billion the same period the year prior and higher than what analysts expected.
Exxon's cash flow, a closely watched metric by investors, fell 24 per cent from a year ago. Investors have been looking for the company to improve cash flow to cover its dividends and capital expenses.
Despite rising output from U.S. shale, profits in Exxon's oil and gas production unit were down 49 per cent to $2.17 billion on weaker prices, its lowest earnings in two years.
Its refining business earned $1.23 billion, down 25 per cent from last year, on lower margins for its gasoline and diesel.
Its chemicals business was down 66 per cent year-over-year. Results have been weaker because of global overcapacity in plastics and higher project expenses.
Exxon's oil equivalent production rose about 3 per cent to 3.89 million barrels per day, the fourth quarter in a row of year-over year gains.
Its production in the Permian Basin, the top U.S. shale field, rose 7 per cent from the second quarter to around 293,000 barrels of oil equivalent daily.
Tepid Q4 outlook for Chevron
Chevron's profit fell to $2.58 billion, or $1.36 per share, in the quarter, from $4.05 billion, or $2.11 per share, a year earlier. Excluding one-time charges and foreign currency gains, the company said it earned $1.55 per share, exceeding the $1.45 per share expected by analysts, according to Refinitiv IBES.
"This was a solid quarter for the company," said Jennifer Rowland, an analyst with Edward Jones, with cash from operations exceeding spending on major projects and shareholder dividends. "We expect robust cash returns to shareholders to continue, she added.
However, the company offered a tepid outlook for the fourth quarter, saying it expected full-year oil and gas production to fall in the middle of its forecast increase of 4 per cent to 7 per cent.
It also warned that overall costs for a giant oil project in Kazakhstan would rise 25 per cent to $45.2 billion. Exxon, a partner in the field, on Friday also said costs of the Tengiz project would affect its future spending.
Chevron shares were down less than 1 per cent on Friday morning.
The second-largest U.S. oil company also said it expects additional costs in the fourth quarter from "high" refinery maintenance and from a $430 million tax payment.
Chevron's worldwide net oil equivalent production grew about 3 per cent to 3.03 million barrels per day, but average sales prices fell both in the United States and internationally.
Production in the Permian Basin, the top U.S. shale field, rose 35 per cent from the same period a year ago to 455,000 barrels of oil and gas daily, but its average U.S. liquids price was $47 per barrel, down from $62 a year ago.