ExxonMobil Corp. (NYSE: XOM) posted a rare earnings miss on July 28, the only international oil producer to do so last quarter, as production slipped in its African and Canadian operations.
ExxonMobil’s results were overshadowed by Chevron Corp. (NYSE: CVX), which easily exceeded Wall Street’s expectations with a double-digit percentage increase in production.
Royal Dutch Shell (NYSE: RDS.A), Total SA and Statoil ASA this week delivered profits that topped expectations also.
Chevron for years has downplayed profits to spend heavily on megaprojects in Australia, the U.S. Gulf of Mexico and elsewhere. That spending now is boosting Chevron’s profit, whereas ExxonMobil has fewer projects about to come online and many of its older assets require more capital to maintain.
While profit rose sharply from a year earlier, the Irving, Texas-based company’s production slipped about 1.0%.
“Exxon continues to really struggle on getting its output up,” said Edward Jones analyst Brian Youngberg.
“Chevron is going from a cash spender to a cash generator, even without commodity prices improving,” he said.
Shares of ExxonMobil fell about 2.0% to $79.17 in July 28 afternoon trading while shares of Chevron gained more than 2.0% to $108.53 per share. Oil prices rose to a two-month high.
ExxonMobil’s stock was the worst drag on the Dow Jones industrial average, while shares of Chevron led the index higher.
Both companies said they would continue to deploy drilling rigs and other equipment to the Permian Basin, the largest U.S. oil field. That expansion, along with similar plans by other U.S. shale peers, is likely to further irritate OPEC, which has tried with mixed success this year to tame an oversupply of crude oil.
ExxonMobil posted second-quarter net income of $3.35 billion, or 78 cents per share, compared to $1.7 billion, or 41 cents per share, a year earlier. Analysts expected earnings of 84 cents per share, according to Thomson Reuters I/B/E/S.
In Africa, where ExxonMobil produces in Nigeria, Angola and elsewhere, production slipped 16% due to declining fields rates and project delays.
Imperial Oil Ltd., which is majority controlled by ExxonMobil and operates in Canada’s oil sands region, posted a net loss, denting ExxonMobil’s results from that country.
ExxonMobil’s Kearl oil sands operations in Alberta were partly offline, hurting Canadian production.
Still, ExxonMobil sought to highlight the positive, stressing its growth opportunities in LNG, especially in Qatar, where it has invested billions.
Despite a recent diplomatic row with its Gulf Arab neighbors, Qatar “is a very important partnership for us,” and ExxonMobil is “very interested” in expanding operations there, company executive Jeff Woodbury told investors on a conference call July 28.
Any expansion would be years away from boosting ExxonMobil’s results. Reuters reported earlier this month that ExxonMobil CEO Darren Woods has been lobbying Qatar to take part in LNG expansions.
Chevron Shines
San Ramon, Calif.-based Chevron boosted output by 10% and cut its costs, part of what executives called a pivot to earnings growth.
The company reported second-quarter net income of $1.45 billion, or 77 cents per share, compared to a net loss of $1.47 billion, or 78 cents per share, in the year-ago quarter.
Excluding one-time items, the company earned 91 cents per share. By that measure, analysts expected earnings of 87 cents per share, according to Thomson Reuters I/B/E/S.
Chevron’s cash flow dropped more than Exxon's, when compared to the same quarter last year, but with a steady stream of projects coming online, nearly all Wall Street analysts have said they prefer Chevron more than its Texas-based rival.
Chevron’s Gorgon LNG project in Australia had suffered setbacks since coming online, including several temporary shutdowns earlier this year.
But those appear to be behind the company, and Chevron said its second LNG project in Australia, at Wheatstone, should be operational later this year, further boosting profit.
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