Exxon Mobil Misses Analysts’ Estimates with 28% Drop in Q1 Profits

Exxon Mobil Misses Analysts' Estimates with 28% Drop in Q1 Profits | Enterprise Wired

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Source- rte.ie

Exxon Mobil Corp faced a setback in its first-quarter earnings, reporting a 28% year-on-year decline in profits. The shortfall was attributed to weaker refining margins and lower natural gas prices despite volume gains. The company’s first-quarter earnings stood at $8.22 billion, or $2.06 per share, compared to $11.43 billion in net profit during the same period last year. Analysts had anticipated higher figures, with profit per share falling 6% short of Wall Street estimates, as per LSEG estimates.

Factors Behind the Decline

Chief Financial Officer Kathryn Mikells highlighted that while the results marked the second-highest for a first quarter in the past decade, they fell short due to tax and inventory balance sheet adjustments. Mikells noted the impact of “pluses and minuses” associated with one-off items, which this time leaned towards the unfavorable. Weaker energy margins, resulting in a $2.6 billion reduction in operating profit compared to the previous year, were primarily responsible for the downturn. Global oil prices remained relatively stagnant, while natural gas prices witnessed a significant decline, with U.S. gas futures trading 20% lower compared to the previous year.

Positive Boosts and Cost-saving Measures

Despite the challenges, Exxon Mobil experienced lower costs and higher volumes from its operations in Guyana, which partially offset the decline. The company’s capital spending in the last quarter marked a seven-quarter low, with streamlined operations contributing to an expansion of structural cost savings by $400 million. Exxon ended the quarter with $1.7 billion in additional cash, totaling $33.3 billion.

Pioneer Acquisition and Future Outlook

Exxon’s impending $60 billion acquisition of Pioneer Natural Resources is expected to conclude in the coming weeks. The acquisition, conducted entirely through stocks, positions Exxon Mobil as the largest oil and gas producer in the leading U.S. shale field. This move is anticipated to double output in the shale field to over 1.3 million barrels of oil equivalent per day. The company projects that the combined entity will reach 2 million barrels per day by 2027, capitalizing on economies of scale and years of future production.

Hess Arbitration

However, Exxon Mobil faces challenges regarding its assets in Guyana, where it is embroiled in a dispute with Chevron and Hess. Exxon has asserted preemption rights over Hess’ Guyana assets amidst Chevron’s $53 billion offer for Hess. This dispute is under consideration by an international arbitration panel. Should the panel uphold Exxon’s preemption rights, the company, along with partner CNOOC Ltd, will explore available options.

Exxon’s first-quarter results reflect a mixed performance influenced by industry dynamics and strategic maneuvers. The impending acquisition of Pioneer Natural Resources signifies a significant step towards solidifying its position in the energy sector, albeit amid ongoing legal disputes that may shape its future trajectory.

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