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ExxonMobil earnings 40% lower than expected

ExxonMobil has become the second large oil company to report earnings well below analysts’ expectations, following Chevron on Friday.

Exxon’s earnings per share were 41 cents for the fourth quarter of 2016, with net income of $1.68bn, 40 per cent lower than expected. The average of analysts’ forecasts was for earnings per share of 70 cents in the quarter.

The lower than expected earnings came after a $2.03bn charge for a writedown in the value of some of ExxonMobil’s assets, principally gasfields in the Rocky Mountain region of the US.

Fourth quarter revenues were also less than expected at $61bn.

It is the company’s first earnings release since new chief executive Darren Woods took over at the start of the year, replacing Rex Tillerson, who has been nominated by President Donald Trump to be US secretary of state.

Mr Woods said in a statement:

“ExxonMobil demonstrated solid operating performance in 2016. Financial results for the year were negatively impacted by the prolonged downturn in commodity prices and the impairment charge… The company’s continued focus on fundamentals and our ability to leverage an attractive global portfolio through our integrated business ensures we are well positioned to generate long-term shareholder value.”

Exxon warned last October that it might have to take a writedown in its 2016 earnings, after the company faced questions from the Securities and Exchange Commission about its valuation of its assets.

However, today’s $2bn charge remains smaller than the hits taken by many other large international oil companies.

Excluding the writedown, Exxon made profit of $1.39bn on its worldwide oil and gas production in the quarter, helped by rising oil and gas prices, with a profit on international operations offset by a $301m loss in the US.

Profits from Exxon’s refining and marketing operations, meanwhile, were down 8 per cent compared to the fourth quarter of 2015 at $1.24bn, and profits from chemicals were down 9 per cent at $872m.

Chevron, the second-largest US oil group, on Friday also reported earnings that were significantly lower than expectations, but held out the prospect of strong growth in output this year.

Exxon’s production averaged 4.1m barrels of oil equivalent per day in 2016, down slightly from the previous year. The company projected last year that its output was likely to stay at around that level until the end of the decade.

Like other oil companies, Exxon has cut its capital spending sharply in the past few years. Capital and exploration spending was $42.5bn in 2013 and by 2016 had fallen to less than half that amount, at $19.3bn.

Via FT