Exxon Mobil Corp reported a 56% decline in second-quarter profit on Friday, falling short of Wall Street expectations. The company’s earnings were negatively affected by a sharp drop in energy prices and lower fuel margins, similar to its industry rivals.
The second-quarter results for major oil companies have seen a significant downturn compared to the substantial profits they recorded a year ago when oil and gas prices surged due to Russia’s invasion of Ukraine. Chevron Corp, Shell, and TotalEnergies also reported profit falls of 48%, 56%, and 49%, respectively.
Exxon’s stock, along with Chevron’s, experienced a slight drop of less than 1% in pre-market trading, as there were no positive surprises in the reported financials.
According to RBC analyst Biraj Borkhataria, Exxon’s earnings and cash flow were slightly weaker than expected, and he predicts that the company will underperform its peers in the market.
Exxon’s net income for the quarter was $7.88 billion, or 1.94 cents per share, in comparison to a record $17.85 billion during the same period the previous year. This fell short of Wall Street’s projection of $2.01 per share.
However, if we exclude the extraordinary profits from the second quarter of the previous year, Exxon’s performance for the April-to-June period represents its strongest in over a decade. This improvement was aided by cost-cutting measures and the divestment of less profitable assets.
Exxon’s Chief Financial Officer, Kathryn Mikells, expressed satisfaction with the results, stating that it was a good quarter for the company. Excluding the exceptional results from the previous year, this quarter’s earnings haven’t been this high since the second quarter of 2011.
The decline in profits was influenced by lower prices for liquefied natural gas (LNG) and reduced industry refining margins. Exxon mentioned that the industry margins decreased compared to a strong first quarter, primarily due to eased concerns over Russian supply.
However, an increase in earnings from Chemical Products helped offset some of the decline. Earnings rose to $828 million from $371 million in the first quarter, partly due to lower feed costs.
Exxon’s oil production for the year so far stands at 3.7 million barrels of oil equivalent per day (boed), which aligns with the company’s annual target.
The company’s improved output in the U.S. Permian basin, delivering 622,000 boed in the quarter, and its plans to boost production in Guyana by 5% to 400,000 boed by the end of the year, have contributed to the positive results.
Exxon reported spending $6.2 billion on capital and exploration in the second quarter and a total of $12.5 billion for the first half of 2023, in line with the company’s full-year guidance of $23 billion to $25 billion.
In terms of cost-saving efforts, Exxon has achieved cumulative structural cost savings of $8.3 billion since 2019, nearing its target of $9 billion.
Earlier this month, Exxon announced its decision to acquire gas pipeline company Denbury Inc for $4.9 billion as part of its efforts to accelerate its energy transition business with carbon capture and storage (CCS) operations.
During the second quarter, Exxon distributed approximately $8 billion in cash to shareholders, including about $3.7 billion in dividends.
Kathryn Mikells emphasized that the company remains committed to its balanced approach to capital allocation and is comfortable with its overall capital allocation strategy.
