Exxon revenue up, 4Q beats expectations
Exxon Mobil increased revenue during a volatile fourth quarter for world oil markets, but profit fell 28 percent from a year earlier, when Exxon booked a huge gain from lower corporate tax rates. The earnings topped Wall Street expectations, however, and capped Exxon’s most profitable year since 2014.
The shares rose $2.64, or 3.6 percent, to close at $75.92 on Feb. 1. Chairman and CEO Darren Woods said the results in a quarter when oil prices tumbled showed that Exxon can generate cash under different kinds of market conditions.
Chevron Corp. also posted strong results Feb. 1 - quarterly profit of $3.73 billion was up 20 percent from a year earlier and finished the company’s best year since 2014.
Both Chevron and Exxon have sold some assets while focusing their drilling in hot spots like the Permian Basin shale formation under west Texas and New Mexico.
Permian production upExxon’s production inched higher by less than 1 percent, but the increase would have been much larger excluding assets that Exxon has since sold. Notably, Exxon’s production in the Permian Basin nearly doubled from a year earlier and grew 12 percent just since the third quarter of 2018. “The company seems to be progressing well on its long-term growth initiatives, with the Permian leading the way out of the gate,” said Brian Youngberg, an energy analyst with Edward Jones.
Oil prices rallied in January as OPEC, led by Saudi Arabia, cut production in December and again in January in a bid to stop the late-2018 slump in crude.
Higher prices should lift Exxon’s fortunes even though the company expects first-quarter production to be about the same as fourthquarter output. On the other hand, margins in the company’s refining business will be “significantly weaker,” said Neil Hansen, vice president of investor relations, because of lower seasonal demand for gasoline and oversupply.
Woods on callA conference call with analysts was dominated by questions about Exxon’s restructuring under Woods, who took over in January 2017 when President Donald Trump picked Rex Tillerson as his first secretary of state. Several analysts thanked Woods for joining the call for the first time - something that Tillerson conspicuously avoided. “I’m happy to be on the call and spending some time talking about our business,” Woods said.
Exxon reported earnings of $6 billion. Excluding the year-ago gain of $5.9 billion for lower U.S. income-tax rates, and big write-downs of assets, the company said profit would have risen 72 percent from the fourth quarter of 2017. Earnings per share were $1.41.
The average estimate of five analysts surveyed by Zacks Investment Research and 17 surveyed by FactSet was for $1.08 per share. Oil prices rose through most of 2018 but tumbled in the fourth quarter on a combination of strong production in the U.S. and around the world, and concern that slowing global economic growth would derail demand for energy.
Roller-coaster rideThe roller-coaster ride for oil prices helps explain why Exxon’s revenue rose 8 percent compared with late 2017 - to $71.9 billion - but slipped nearly $5 billion from the third quarter. Revenue was below the $72.53 billion average forecast in the FactSet survey.
Irving, Texas-based Exxon’s pace of spending on exploration slowed as oil prices tumbled. Capital spending in the fourth quarter was 13 percent lower than a year earlier. For all of 2018, Exxon Mobil Corp. earned $20.84 billion, slightly higher than the tax-cut-aided 2017 profit of $19.7 billion, and the oil giant’s best year since 2014, when it earned $32.5 billion.
Oil prices began falling in the middle of 2014, pushing Exxon’s profit down over the next few years. At the Feb. 1 closing price, Exxon shares had increased 11 percent since the beginning of the year, while the Standard & Poor’s 500 index had gained 8 percent. Exxon’s stock has fallen 15 percent in the last 12 months.