Exxon Mobil Corp (NYSE:XOM)disappointed analysts on Friday with a 28% year-on-year decline in first-quarter profits, falling short of expectations as weaker refining margins and lower natural gas prices offset volume gains.
The largest U.S. oil company reported first-quarter earnings of $8.22 billion, or $2.06 per share, compared to a net profit of $11.43 billion a year ago. Profit per share fell 6% below Wall Street analysts’ consensus, according to LSEG estimates. Chief Financial Officer Kathryn Mikells attributed part of the miss to tax and inventory balance sheet adjustments, stating, “Every quarter, we have some pluses and minuses associated with these one-off items. Sometimes they are favorable, this time they were unfavorable.”
Weaker energy margins slashed operating profit by approximately $2.6 billion compared to a year ago, with global oil prices remaining relatively flat while natural gas prices plummeted. U.S. gas futures traded 20% lower at the end of the quarter compared to the previous year.
Exxon’s results were buoyed by lower costs and higher volumes from its Guyana operations, with output gains of 70% year-over-year. The company’s capital spending last quarter was the lowest in seven quarters, while its streamlining of operations expanded structural cost savings by $400 million.
Despite the profit decline, Exxon added $1.7 billion in cash last quarter, ending the period with $33.3 billion.
Exxon’s acquisition of Pioneer Natural Resources, expected to close in the coming weeks, aims to make it the largest oil and gas producer in the top U.S. shale field, doubling output to more than 1.3 million barrels of oil equivalent per day. The deal, valued at $60 billion, is part of a trend of major acquisitions in the oil industry, aimed at securing future production and achieving economies of scale.
Amidst this, Exxon is embroiled in a dispute with Chevron and Hess over assets in Guyana. Exxon claims preemption rights over Hess’ Guyana assets, which are under consideration by an international arbitration panel. Hess’ 30% stake in the Guyana joint venture is a focal point in Chevron’s proposed takeover, with Exxon and partner CNOOC Ltd poised to evaluate their options depending on the panel’s decision. Mikells emphasized, “It is all about clarifying our contractual rights, period.”
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