ExxonMobil missed Wall Street estimates for second-quarter profit on Friday, even as high oil prices and improved refining margins brought by the Iran war led to its biggest quarterly profit in four years. Adjusted earnings for the largest U.S. oil major by market capitalization rose 67% from the first quarter to $14.7 billion, or $3.52 per share, but were below the consensus analyst estimates compiled by LSEG of $3.60 per share. Still, the quarterly profit more than doubled compared with last year, which could draw more attention from U.S. President Donald Trump, who last month called for an investigation into oil companies he accused of price gouging.
Exxon Chief Financial Officer Neil Hansen said the company’s underlying results were strong and attributed the miss to “extreme swings” in commodity prices and margins that were difficult to model. Fellow U.S. oil major Chevron beat analyst estimates for the second quarter, as did its European counterpart Shell, while quarterly results from French major TotalEnergies met expectations.
“The second quarter was shaped by disruption, but defined by execution,” Exxon CEO Darren Woods said in a statement. “As conditions changed, we moved products where they were needed.” Exxon shares slid about 2% in premarket trading before paring some of the losses.
While the U.S. and Iran agreed to a ceasefire in April, the two sides have remained at odds over terms for a peace deal, including details about how to resume shipping traffic through the Strait of Hormuz, through which one-fifth of global energy supplies normally transit. Uncertainty over the tenuous ceasefire pushed up the average closing price of benchmark Brent crude to $96.68 per barrel, up 23% from the first three months of the year. Exxon’s adjusted upstream earnings for the period were $9.2 billion, and adjusted refining profit was $4.1 billion, both higher than the previous quarter. Both were, however, weaker than analysts had expected as the conflict in the Middle East continues to hurt some operations, according to RBC Capital Markets analyst Biraj Borkhataria.
“Given (Exxon’s) overweight position in Qatar and the lack of alternative export routes for Qatari LNG, we expect this to weigh on sentiment as long as the war continues,” he wrote in a research note.
SOME MIDDLE EAST OUTPUT REMAINS OFFLINE
Exxon’s total production eased to 4.5 million barrels of oil equivalent per day in the second quarter from 4.6 million boepd in the first three months of the year. About 450,000 barrels per day of lost output is related to loss of liquefied natural gas production in Qatar after Iranian attacks on energy facilities this year.
“That remains substantially shut-in. There’s not much production coming out from LNG,” Hansen said. He said Qatar continued to produce about 150,000 boepd of domestic gas, while an oilfield in the United Arab Emirates was producing 250,000 bpd with about 50,000 bpd offline. However, Exxon will not be able to book revenue from that output until shipping reopens and it can sell the barrels, Hansen said. Those losses were offset by the production from the Permian Basin in the U.S., which reached a record of more than 1.8 million bpd in the second quarter. In Guyana, a fifth floating production platform is set to begin operations in the fourth quarter and will increase production capacity by 250,000 bpd. If the Strait of Hormuz remains closed for the entire third quarter, production from the Middle East would be reduced by about 750,000 boepd compared with last year, Exxon said. Despite the earnings miss, the results mark a turnaround from the first quarter, when Exxon booked a large multibillion-dollar paper loss from financial hedging related to the delivery of some cargoes. Exxon paid $4.3 billion in dividends and bought back $5.1 billion worth of shares during the quarter, staying on track for its target to buy back $20 billion worth of shares this year. Hansen said the company, which reduced its net debt by $7 billion in the second quarter, was focused on further improving its balance sheet before increasing dividends and buybacks. Exxon shares are up 28% so far this year, just under the S&P 500 energy index, which is up 29%.
(Reporting by Sheila Dang in Houston; Editing by Nathan Crooks, Jamie Freed, Barbara Lewis and Tomasz Janowski)