Exxon Mobil profit drops on weakness in natural gas, chemicals, refining

Reuters

Published Aug 02, 2019 10:41AM ET

By Jennifer Hiller

HOUSTON (Reuters) - Exxon Mobil Corp (N:XOM) on Friday reported a 21% drop in quarterly profit, its third period in a row of weaker year-over-year results, as sharply higher oil production was offset by weaker refining and chemicals business.

Shares slipped 1 percent to $71.71 in early trading even though its 73 cents a share profit topped analysts' recently-lowered estimates. Analysts had reduced estimates to 66 cents per share after Exxon last month guided to lower year-over-year profit. Exxon’s weaker earnings mirrored those at rivals Royal Dutch Shell (L:RDSa), Equinor (OL:EQNR) and Total SA (PA:TOTF). Shell posted its smallest profit in 30 months on weaker margins in chemicals, a loss in refining and tumbling natural gas prices. Total also cited weaker natural gas and refining operations for earnings that fell 19% from a year ago, while Equinor’s profit fell 27% on weaker oil and gas prices.

A bright spot for Exxon was oil and gas production rising 7% to 3.9 million barrels per day. Output in the top U.S. shale field, the Permian Basin, rose to 274,000 barrels of oil and gas per day, up 90% from a year ago.

"Three of our businesses were at lows in their cycles," said Neil Chapman, an Exxon senior vice president, adding the company historically invests during downturns for long-term returns.

The largest U.S. oil producer's net income fell to $3.13 billion, or 73 cents per share, in the second quarter, from $3.95 billion, or 92 cents per share, last year.

"Pretty weak quarter from them once again," said Jennifer Rowland, analyst with Edward Jones. After capital spending and dividends, Exxon had a free cash flow shortfall of $2.7 billion, similar to last quarter, Rowland added.

Exxon has made "limited progress on asset sales," though, analysts at Tudor, Pickering, Holt & Co said in a note to clients.

Exxon's Chapman said the company remains committed to selling $15 billion worth of assets through 2021.

The sales are needed to finance shareholder returns and major projects, but Exxon reported just $33 million in asset sales for the period, the lowest in at least 12 quarters. That follows proceeds from sales of $107 million in the first quarter.

Exxon's chemicals business fell to a loss in the United States for the first time in at least three years.

Lower margins and downtime drove refining profits down 88 percent over last year.