Exxon Mobil (NYSE:XOM) saw a decline in its third-quarter profits compared to the previous year when the oil giant posted record numbers amid surging oil prices. However, the company’s net income increased by 15% compared to the previous quarter, and it also announced an increase in its quarterly dividend.
This year, Exxon went on a spending spree, making significant acquisitions. In July, the company acquired the pipeline operator Denbury for $4.9 billion. Denbury has been impacted by changes in U.S. climate policy. A few weeks ago, Exxon made headlines once again by announcing its plan to purchase Pioneer for $60 billion.
Exxon’s consolidation efforts are not unique. Chevron, another major player in the energy sector, recently revealed its intention to spend over $50 billion to acquire Hess.
In terms of financials, Exxon Mobil Corp. reported earnings of $9.07 billion, equivalent to $2.25 per share for the quarter. This is in comparison to the previous year when the company recorded earnings of $19.66 billion, or $4.68 per share. When adjusting for certain items, earnings for the quarter were $2.27 per share. Although analysts polled by Zacks Investment Research expected slightly higher earnings at $2.36 per share, Exxon follows a policy of not adjusting its reported results based on one-time events like asset sales, which is common among most companies.
Despite the decline, Exxon’s revenue for the quarter remained substantial at $90.76 billion, albeit lower than the previous year’s $112.07 billion. However, it exceeded Wall Street’s estimated revenue of $89.29 billion.
In terms of production, there was a 0.8% dip to 3,688 thousand oil-equivalent barrels per day. Nevertheless, Exxon announced that it achieved its best-ever third-quarter global refinery throughput, processing 4.2 million barrels per day.
Exxon’s Chairman and CEO, Darren Woods, expressed satisfaction with their performance, stating, “We delivered another quarter of strong operational performance, earnings, and cash flows, adding nearly 80,000 net oil-equivalent barrels per day to support global supply.”
These results come on the heels of Exxon’s announcement to acquire Pioneer Natural Resources for nearly $60 billion. This acquisition represents Exxon’s largest since it bought Mobil two decades ago. It will significantly expand Exxon’s presence in the Permian Basin, a vast oilfield straddling the border between Texas and New Mexico.
Exxon is currently in a robust financial position, having posted record profits of $55.7 billion last year, surpassing its previous record of $45.22 billion in 2008 during a period of high oil prices.
The energy sector is experiencing a wave of consolidation as major producers find themselves with substantial cash reserves. Chevron, for instance, recently revealed its plan to acquire Hess Corp. for $53 billion.
Chevron also reported its quarterly results, posting a third-quarter profit of $6.53 billion, or $3.48 per share. When adjusted for pretax gains, earnings were $3.05 per share, falling slightly below Wall Street’s expectation of $3.68 per share. Like Exxon, Chevron does not adjust its reported results based on one-time events such as asset sales.
Overseas production for Chevron declined by 112,000 barrels per day compared to the previous year, largely attributed to higher impacts from turnarounds, shutdowns, and natural field declines. Despite this, Chevron’s quarterly revenue of $54.08 billion exceeded analysts’ expectations of $54 billion.
Crude oil prices surged earlier in 2022 due to Russia’s invasion of Ukraine and have remained around $90 per barrel, with a 9% increase this year. This increase in prices has left major oil companies with substantial cash reserves, seeking opportunities for investment.
Oil markets are facing challenges due to production cutbacks in Saudi Arabia and Russia. Additionally, a conflict between Israel and Hamas in the Middle East poses the risk of broader regional instability. While attacks on Israel do not directly disrupt global oil supply, they raise concerns about potential oil supply disruptions and higher oil prices, as noted in an analysis by the U.S. Energy Information Administration.
The energy industry is closely monitoring the evolving situation in the Middle East, with recent escalations including Israeli forces conducting a ground raid into Gaza and U.S. warplanes striking targets in eastern Syria.
Exxon also announced an increase in its fourth-quarter dividend, raising it from 91 cents per share to 95 cents per share. As a result of these developments, Exxon’s shares experienced a slight dip at the opening bell, while Chevron’s shares dropped by more than 5%.
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