Oil giants spur investor wrath on earnings miss

Exxon and Chevron did not reap benefit of recent upturn in global oil prices, writes Kevin Crowley

EXXON Mobil and Chevron, failing to capitalise on a more than 50pc rise in oil prices since June, spurred the wrath of investors by missing fourth-quarter estimates on both earnings and output.

Results from the two companies followed a day-earlier report by rival Conoco-Phillips that included a dividend boost, share buybacks, and a $400m (€321m) Alaska expansion.

The difference: Conoco is solely focused on drilling; Exxon and Chevron’s refineries reported lower than expected returns at a time of fat gasoline and diesel margins.

“One word: disappointing,” is how Brian Youngberg, a St Louis-based analyst at Edward Jones & Co, described the results. “Chevron was close on production but Exxon was a significant miss,” he said. “The company continues to be challenged on that side.”

Exxon fell 15 cents short of fourth-quarter earnings estimates by analysts, while Chevron was 55 cents shy. Royal Dutch Shell also saw its shares fall on Thursday when it reported a weaker-than-expected outcome from refineries.

While Exxon has long held that choosing to produce lower-cost oil is more important than the volume of output, the latter remains a key metric for investors.

“I certainly acknowledge the drop that we’ve seen in upstream business and the return on capital employed,” Jeff Woodbury, vice president of investor relations at Exxon, said on a call with analysts. Discoveries in Guyana and acquisitions in Mozambique and Papua New Guinea will boost returns in the future, he said.

Exxon will lay out a more detailed growth plan at its analyst day on March 7, Woodbury said. Meanwhile, the company said it has no plans to resume a share buyback programme to return capital to shareholders that was ended in early 2016.

Chevron will grow production between 4pc and 7pc next year and cash flow is improving, chief executive Mike Wirth said. “All the fundamental drivers of cash flow are moving in the right direction,” he said, while cautioning that it’s “premature” to talk about share buybacks. Chevron increased its dividend this week.

Exxon’s per-share net income, excluding a one-time gain from US tax code changes, was 88 cents, well short of the $1.03 average of 20 estimates from analysts in a Bloomberg survey. Chevron’s per-share earnings, excluding onetime items, amounted to 67 cents, far below the $1.22 average of 19 estimates from analysts in a Bloomberg survey.

The fourth-quarter results hit as both Exxon CEO Darren Woods and Chevron’s CEO Mike Wirth, who stepped into the role on Thursday after being named CEO-in-waiting in September, are gearing up for production growth.

In Chevron’s case, the company this year is expected to start reaping the rewards after years of investment into expensive mega projects from Australia to Kazakhstan. Production will rise between 4pc and 7pc in 2018 without asset sales, Wirth said.