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Exxon misses on profit as output hits lowest level in decade
[HOUSTON] Investors battered the shares of America's two biggest oil explorers after Exxon Mobil Corp and Chevron Corp posted disappointing earnings, failing to fully capitalize on rising oil prices.
For Chevron, weaker-than-forecast financial results didn't dissuade the company from resurrecting share buybacks to the tune of US$3 billion annually after a three-year hiatus. Exxon not only failed to live up to earnings expectations but also delivered its worst production performance since 2008 and offered no new payouts to shareholders.
Exxon's failure to mimic the buyback campaigns of most of its rivals added to investors' pain: the oil giant's stock tanked at more than twice the pace of Chevron. Exxon was down 4.3 per cent at 8.55 am while Chevron took a 1.8 per cent penalty.
"When you see peers generating cash and returning it to shareholders that further reduces interest in the stock which was pretty low anyway," said Brian Youngberg, a St Louis-based analyst at Edward Jones & Co.
Exxon produced the equivalent of 3.6 million barrels of oil in the second quarter, well short of the 3.83 million expected by analysts, the Irving Texas-based company said in a statement. Maintenance and repairs at undisclosed oil fields more than offset output gains from US shale and offshore Canadian assets, the company said.
Both companies failed to fully capitalize on a Brent crude price that was almost 50 per cent higher than a year earlier.
Exxon's net income of US$3.95 billion lagged the US$5.35 billion average forecast from analysts. Chevron reaped US$3.41 billion, compared to a US$3.94 billion forecast.
The Permian Basin of West Texas and New Mexico was a bright spot for both companies, with Exxon increasing production 45 per cent compared with the previous quarter. The company is currently operating 34 rigs in the region, four more than its year-end target. Chevron increased production from its Permian wells by more than 50 per cent from a year earlier.
Before today's updates, Chevron was the third-largest producer in the Permian and Exxon was fifth, according to researcher Wood Mackenzie Ltd.
Chevron Chief Executive Officer Mike Wirth followed similar shareholder-friendly moves by rivals such as Royal Dutch Shell Plc and ConocoPhillips. On Thursday, Shell announced US$2 billion in stock repurchases but it wasn't enough to outweigh an earnings miss that dinged the stock by more than 3 per cent.
Mr Wirth, who began the role in February, has said company should not just survive at US$50-a-barrel oil but deliver good profits at that level.
As for Exxon, the explorer is prioritizing big project investment to recover from missteps into Canadian oil sands, Russia and US shale gas over the past decade.
Long an industry-leader in returns and stock-market valuation, Exxon has slipped in recent years as costly mistakes over the past decade came to the fore. Major investments in Canada, Russia, and US shale gas while former CEO Rex Tillerson was in charge haven't lived up to expectations.