Exxon Mobil reported quarterly earnings that beat analysts’ estimates, but fell 38% from the year-ago period as low oil prices cut into the company’s exploration and production segment and refining margins continued to contract.
Exxon reported third-quarter earnings of $2.7bn, or 63 cents a share, on revenue of $58.68bn, compared with a profit of $4.2bn, or $1.01 a share, on $67.3bn in the same period last year.
Analysts were expecting Exxon to report EPS of 58 cents on revenue of $63.85bn.
The energy company’s stock was down 1.4%.
“We think this is a slight negative for XOM, with the headline beat offset by weaker underlying performance,” RBC Capital Markets analyst Brad Heffern wrote in a note.
Heffern said better-than-expected results were entirely due to international downstream performance and corporate factors, without which earnings would have likely come in at 50 cents a share.
Looking forward, Exxon said if oil prices continue at the 2016 average, as much as 4.6bn barrels will not qualify as proved reserves under regulatory rules.
During the third quarter, The Wall Street Journal reported the Securities and Exchange Commission and New York Attorney General Eric Schneiderman’s office launched probes to determine if Exxon should have written down the value of its reserves. Unlike peers such as BP and Chevron, Exxon has resisted doing so throughout the two-year oil price rout.
The SEC and Schneiderman are also seeking to determine whether Exxon adequately accounts for how climate change could impact its business, after an earlier investigation into the matter launched by Schneiderman.
Exxon’s capital spending fell 45% from a year earlier. Liquids production dropped by 5.1%, while natural gas output was up less than 1%.
Earnings from the upstream segment — responsible for exploring for and extracting fossil fuels — fell by $738mn from the third quarter of 2015 as lower realisations from petroleum liquids and gas fell. Liquids production dipped largely due to downtime in Nigeria, where militants have targeted oil infrastructure in the country’s crude-producing southern delta region.
In the downstream business, which refines and markets fuels to consumers, earnings fell by $804mn from a year ago due to weaker margins in refining and lower petroleum product sales. Oil majors’ refining businesses have come under pressure as crude prices rebound. Crude is the raw material for many fuels.
Margins also contracted in Exxon’s chemicals segment, where earnings were down by $56mn.
Exxon announced a quarterly dividend of 75 cents per share last week. The company hasn’t raised its dividend since the second quarter of 2014.
The company also said last week that it had made a discovery off the shores of Nigeria with 500mn to 1bn barrels of potentially recoverable oil. That comes on the heels of a roughly billion-barrel find in its offshore Guyana assets in the second quarter.
Many analysts say Wall Street is not overly concerned about either matter.
“It’s headline risk. Yes, it can be impactful day to day for the stock, but it’s not going to move the needle in terms of financial results for the company,” Raymond James energy analyst Pavel Molchanov told CNBC last week.
A number of analysts see Exxon underperforming in a recovery because other energy stocks that fell further during the downturn have greater upside. It also has less leverage to a crude price bounce because it isn’t solely dependent on exploration and production.
“There’s really not a lot of places that Exxon can turn to for significant earnings growth,” CFRA energy analyst Stewart Glickman said to CNBC. “We don’t see a lot of positive catalysts right now.”
