Exxon misses on Q1 profit despite big gains in Guyana (updated)
26/04/2024 12:04
(Adds shares lower in pre-market trading, paragraphs 3-5)
By Sabrina Valle
HOUSTON, April 26 (Reuters) - Exxon Mobil Corp XOM.N
on Friday missed analysts' estimates with a 28% year-on-year
drop in first quarter profits as weaker refining margins and
lower natural gas prices offset volume gains.
The largest U.S. oil company, which is in the process of
closing a $60 billion deal for top shale oil producer Pioneer
Natural Resources PXD.N , posted first-quarter earnings of
$8.22 billion, or $2.06 per share, compared to an $11.43 billion
net profit a year ago.
The stock was down 2% in pre-market trading to $118.50 after
reporting a profit per share of $2.06, 6% shy of Wall Street
analysts' consensus for $2.20 per share, LSEG estimates showed.
Earnings from oil and gas production fell 14% on lower
natural gas prices and refining tumbled 67% on weaker margins
and investment and tax costs. The chemicals business, however,
was a standout, with earnings more than doubling on lower input
costs and higher margins, the company said.
Earnings of $8.22 billion for the first quarter ended March
31 were off 29% compared to adjusted profit of $11.62 billion a
year earlier.
But the results were the second highest for a first quarter
in the past decade, behind the year-ago period, said Chief
Financial Officer Kathryn Mikells. The miss was due in part to
tax and inventory balance sheet adjustments, she said.
"Every quarter, we have some pluses and minuses associated
with these one-off items", she said. "Sometimes they are
favorable, this time they were unfavorable."
Global oil prices were largely flat against a year ago while
natural gas prices fell sharply. U.S. gas futures traded 20%
lower at the end of the quarter compared to a year-earlier.
Results were boosted by lower costs and higher volumes from
Exxon's Guyana operations. Hess a day earlier flagged the
increase in output in the South American country with a 70%
year-over-year output gain.
Exxon's capital spending last quarter was the lowest in
seven quarters and its streamlining of operations expanded what
it calls structural cost savings by $400 million.
It added $1.7 billion in cash last quarter to end the period
with $33.3 billion.
DEAL CLOSING
Exxon’s acquisition of Pioneer is expected to wrap up in
coming weeks. Exxon has started the integration process with a
team working separately from the business, Mikells said.
"We are feeling really good about our interactions with the
Pioneer people and making sure that we put our best foot forward
as we close this transaction," she said.
The all-stock deal for Pioneer would make Exxon the largest
oil and gas producer in the top U.S. shale field, doubling
output there to more than 1.3 million barrels of oil equivalent
per day. Exxon forecasts the combination will allow it to reach
2 million barrels per day in 2027.
That deal was the largest among a series of blockbuster
combinations in recent years, as wildcatters including Pioneer,
Endeavor Energy and CrownRock were acquired by bigger companies
which sought to lock in years of future production and achieve
economies of scale from expanded operations.
Pioneer’s shares this week traded at $275 apiece, a 9%
increase to their October deal value.
HESS ARBITRATION
Exxon is in a dispute with Chevron and Hess over assets in
Guyana, home to the biggest oil finds in the past two decades.
In face of Chevron's $53 billion offer for Hess, Exxon has
claimed preemption rights over Hess' Guyana assets. That claim
is being considered by an international arbitration panel.
Hess' 30% stake in the Guyana joint venture is the prize in
Chevron's proposed takeover.
Mikells said Exxon and partner CNOOC Ltd will "evaluate our
options" if the arbitration panel agrees that they have the
first of first refusal to a sale.
"It is all about clarifying our contractual rights, period,"
she said.
(Reporting by Sabrina Valle; editing by Sonali Paul)
((sabrina.valle@tr.com; Twitter: @sabrinavalle;))