Top 2 oil firms’ prof­its surge in 2Q

Exxon earns $3.35B but misses fore­casts; Chevron re­bounds

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - In­for­ma­tion for this ar­ti­cle was con­trib­uted by staff mem­bers of The As­so­ci­ated Press; and by Joe Car­roll and Jes­sica Sum­mers of Bloomberg News.

IRV­ING, Texas — Exxon Mo­bil Corp. cut spend­ing on oil ex­plo­ration, help­ing drive earn­ings up to $3.35 bil­lion in the sec­ond quar­ter, dou­bling its his­tor­i­cally low profit of a year ago.

Profit rose for both pro­duc­tion of oil and gas and Exxon’s re­fin­ing busi­ness. The re­sults, how­ever, still fell short of Wall Street ex­pec­ta­tions.

West Texas In­ter­me­di­ate crude for Septem­ber de­liv­ery rose 67 cents to set­tle Fri­day at $49.71 a barrel on the New York Mer­can­tile Ex­change. Oil prices are up about 18 per­cent from a year ago. That’s good for the fi­nances of Exxon and other oil and gas com­pa­nies.

The Irv­ing, Texas-based oil gi­ant said Fri­day that it earned 78 cents per share, which was not ad­justed for one-time items such as as­set sales. Nine an­a­lysts sur­veyed by Zacks In­vest­ment Re­search ex­pected 83 cents per share on av­er­age.

Rev­enue rose 9 per­cent to $62.88 bil­lion, beat­ing the $61.16 bil­lion fore­cast of four an­a­lysts in the Zacks sur­vey.

“Tough quar­ter” for Exxon, wrote Guy Baber, an an­a­lyst at Piper Jaf­fray & Co., in a note to clients. With Exxon, most of the un­der­per­for­mance was “con­cen­trated in the up­stream seg­ment, and weaker-than-ex­pected op­er­at­ing cash flow gen­er­a­tion. Pro­duc­tion was also a bit dis­ap­point­ing vs. our model.”

Exxon said higher prices it got for oil and gas helped

off­set a 1 per­cent de­cline in pro­duc­tion of oil and gas.

Exxon’s ex­plo­ration and pro­duc­tion side earned $1.2 bil­lion, an in­crease of $890 mil­lion from a year ago, de­spite a nar­row loss in U.S. pro­duc­tion. That profit matched the amount that Exxon cut from cap­i­tal and ex­plo­ration, a 24 per­cent re­duc­tion from a year ear­lier.

The com­pany posted a $1.4 bil­lion profit from re­fin­ing and sell­ing petroleum prod­ucts, up $560 mil­lion from a year ear­lier on higher mar­gins.

Chair­man and Chief Ex­ec­u­tive Of­fi­cer Dar­ren Woods said in a state­ment that the re­sults were driven by higher com­mod­ity prices and “a con­tin­ued fo­cus on op­er­a­tions and busi­ness fun­da­men­tals.”

While cut­ting ex­plo­ration spend­ing, Exxon is push­ing ahead with drilling off the coast of Guyana in South Amer­ica, with pro­duc­tion ex­pected to be­gin by 2020. The com­pany has said that test wells hit high­qual­ity

oil reser­voirs.

At home, the com­pany is un­der in­ves­ti­ga­tion by state of­fi­cials, who ac­cuse it of mis­lead­ing the pub­lic about oil’s role in cli­mate change. In May, share­hold­ers voted to ask the com­pany for a re­port on how cli­mate change will af­fect the oil and gas busi­ness.

Last week the Trea­sury Depart­ment fined Exxon for vi­o­lat­ing sanc­tions against Rus­sia dur­ing Sec­re­tary of State Rex Tiller­son’s ten­ure as CEO by sign­ing con­tracts with a Rus­sian oil mogul who was on a U.S. black­list. Exxon went to court to chal­lenge the fine.

Exxon shares fell $1.23, or 1.5 per­cent, to close Fri­day at $79.60.

Chevron, the sec­ond-largest U.S. driller be­hind Exxon, swung to a sec­ond-quar­ter profit of $1.45 bil­lion, or 77 cents a share, com­pared to a loss of $1.47 bil­lion, or 78 cents, a year ear­lier, the com­pany said Fri­day in a state­ment. The 77 cents a share was a dime less than the av­er­age of 21 es­ti­mates re­ly­ing on gen­er­ally ac­cepted ac­count­ing prin­ci­ples. Ex­clud­ing non­cash costs re­lated to

uniden­ti­fied as­set im­pair­ments and other items, the per-share re­sult was 91 cents, on an ad­justed ba­sis. Oil and gas pro­duc­tion surged 10 per­cent, the most in more than seven years.

‘We’re de­liv­er­ing higher pro­duc­tion with lower cap­i­tal and op­er­at­ing ex­pen­di­tures,” Chief Ex­ec­u­tive Of­fi­cer John Wat­son said in the state­ment.

Wat­son, in his eighth year at the helm, has re­sorted to job cuts, project can­cel­la­tions and bil­lions of dol­lars in as­set sales to cope with an in­dus­try down­turn that erased $50 bil­lion from Chevron’s mar­ket cap­i­tal­iza­tion. While the com­pany re­ported higher-than-ex­pected out­put from wells in the quar­ter, turn­ing its up­stream unit from a year-ago loss to prof­itabil­ity, re­turns on re­fin­ing crude into fu­els shrank.

Chevron shares rose $2.01, or 1.9 per­cent, to close Fri­day at $108.12.

Bloomberg News/COOPER NEILL

A ve­hi­cle leaves an Exxon Mo­bil gas sta­tion in Dal­las. Exxon said Fri­day that higher prices for oil and gas helped it off­set a 1 per­cent de­cline in pro­duc­tion.

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