Exxon Mobil shares fell nearly 2% in early trading on Jan. 8 after the top U.S. oil producer warned of a decline in refining profits in the fourth quarter and weak returns across its operations.

The earnings snapshot from the industry bellwether signaled a challenging environment as companies grapple with pricing pressure amid demand volatility.

Exxon expects fourth-quarter earnings to be lower by about $1.75 billion from the prior quarter.

For much of last year, Exxon and other oil majors faced reduced profitability from refining crude oil and selling petroleum products as a post-pandemic boom in demand ended. The opening of big plants around the world also weighed on refining margins growth.

In the third quarter, Exxon's profits fell 5% compared to the year-ago quarter, while Chevron's tumbled 21%.

Exxon's earnings update is "consistent with revisions seen for independent refiners and other majors with heavy refining exposure," said Biraj Borkhataria, an oil analyst with RBC Capital Markets, in a note to investors.

The snapshot will likely be viewed as a "negative" and weigh on the shares in the near term, he added.

Exxon is one of the world's largest refiners with a total global refining capacity of 4.5 MMbbl/d and is also one of the world's largest manufacturers of commodity and specialty chemicals.

The company is expected to deliver a profit of $1.76 per share in the fourth quarter, according to data compiled by LSEG. The oil major posted earnings of $2.48 per share a year earlier.

Exxon has a price-to-earnings (PE) ratio of 13.56 compared to Chevron's 16.43. A lower PE multiple indicates a more attractive investment opportunity.

Exxon's shares rose 7.6% in 2024, underperforming the S&P 500's .SPX 23.3% gain.

Comments