Exxon Mobil Reports 56% Drop in Profits, Misses Wall Street Expectations
Exxon Mobil, the largest publicly traded oil company, has reported a significant decline in second-quarter profits. The company’s earnings dropped by 56%, falling below the expectations set by Wall Street. This decline can be attributed to the decrease in energy prices and lower fuel margins.
Interestingly, this drop in profits is part of a larger trend observed among global oil majors. Since 2022, these companies have experienced a decline in profits by about half, indicating the challenges faced by the industry.
However, despite the overall drop, Exxon Mobil posted its strongest results for the April-to-June quarter in over a decade, excluding last year’s record second quarter. This achievement can be attributed to cost-cutting measures implemented by the company and the sale of less profitable assets.
In an effort to further reduce costs, Exxon plans to continue its ongoing cost-cutting initiatives. The company has already eliminated an impressive $8.3 billion in costs since 2019.
During the second quarter, Exxon’s net quarterly income amounted to $7.88 billion, or $1.94 per share, compared to $17.85 billion during the same period the previous year. This figure fell short of the $2.01 per share analysts were anticipating.
According to Biraj Borkhataria, an analyst at RBC, Exxon’s results were slightly weaker than expected across earnings and cash flow.
As a result of this disappointing news, Exxon’s shares fell by about 2% in morning trade. Rival company Chevron also reported a significant plunge in profits.
Both Exxon and Chevron have prioritized repaying shareholders over capital spending and have plans to maintain their cash distribution programs.
Despite the challenging circumstances, Exxon’s CEO, Darren Woods, remains optimistic about the industry. He believes that there will be a record oil demand this year and in the following year, which could potentially help boost energy prices in the second half of this year.
Exxon’s earnings were also affected by lower natural gas prices and refining margins. Compared to its peers, Exxon has a larger refining business, which has contributed to the impact on earnings.
On a positive note, earnings in chemical products experienced a significant surge, rising from $371 million to $828 million in the quarter. This increase can be attributed to lower feed costs.
In terms of oil production, Exxon has maintained a consistent output of 3.7 million barrels of oil equivalent per day (boepd) so far this year. This stability can be credited to improved production in the U.S. Permian basin and Guyana. Additionally, the company has plans to increase production in Guyana by 5% to reach 400,000 boepd by the end of the year.
During the first half of 2023, Exxon spent $12.5 billion on capital and exploration, aligning with their full-year guidance.
Exxon has recently made news with its acquisition of gas pipeline company Denbury for $4.9 billion. This acquisition will accelerate the company’s energy transition business, specifically focusing on carbon capture and storage (CCS) operations.
Despite the acquisition, Exxon remains committed to prioritizing its cash distribution program over acquisitions. Additionally, the pace of the company’s $17 billion expenditure program on lower carbon projects through 2027 will be based on their commitments to shareholders.
In the second quarter alone, Exxon distributed $8 billion in cash to shareholders, including $3.7 billion in dividends.
Overall, despite the decline in profits, Exxon Mobil has shown resilience in challenging times. The company’s focus on cost-cutting measures and strategic investments positions them for future success in the evolving energy landscape.
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