Why Exxon Mobil Earnings Failed to Meet Expectations

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Exxon Mobil Corp. (NYSE: XOM) reported estimated first-quarter results before markets opened Friday. The integrated oil and gas giant posted quarterly diluted earnings per share (EPS) of $1.09 on revenues of $68.21 billion. In the same period a year ago, the company reported EPS of $0.95 on revenues of $58.67 billion. First-quarter results also compare to the consensus estimates for EPS of $1.13 on revenues of $63.6 billion.

Net income in the quarter rose from $4 billion a year ago to $4.65 billion. Oil-equivalent production was down 6.3% year over year from 4.15 million barrels a day last year to 3.89 million barrels a day.

Worldwide upstream earnings totaled $3.5 billion, compared with $2.25 billion in the year-ago quarter. Higher prices increased earnings by $1.43 billion, while volumes and mix reduced earnings by $190 million.

Worldwide natural gas production fell by 870 million cubic feet per day, which the company attributed primarily to higher downtime and an earthquake in Papua New Guinea. Global liquids production dropped by 5% (117,000 barrels a day) to 2.22 million barrels a day.

U.S. upstream (exploration and production) activities posted earnings of $429 million. Non-U.S. upstream earnings totaled $3.07 billion.

In the downstream division, earnings fell to $940 million, down by $176 million year over year. Lower refining margins decreased earnings by $30 million, while volume and mix effects decreased earnings by $60 million. All other items decreased earnings by $90 million. Petroleum product sales of 5.43 million barrels per day were 37,000 barrels per day higher than last year’s first quarter.

Capital spending totaled $4.87 billion in the quarter, up 17% year over year.

CEO and Chairman Darren Woods said:

Increased commodity prices, coupled with a focus on operating efficiently and strengthening our portfolio, resulted in higher earnings and the highest quarterly cash flow from operations and asset sales since 2014. Through new discoveries and acquired acreage, we’ve positioned our Upstream portfolio well for future growth. We also made good progress on our plans to improve the production mix and grow premium product sales in the Downstream and Chemical businesses.

The company did not provide guidance in its press release, but analysts are expecting second-quarter EPS of $1.22 on revenues of $67.86 billion, compared with EPS of $0.78 and revenues of $62.88 billion in the second quarter of 2017. For the full year, analysts are looking for EPS of $4.77 on revenues of $296.45 billion.

First-quarter results were disappointing and early reaction to the report underscores that. Exxon’s shares traded down more than 2% in Friday’s premarket and down nearly 4% to $77.70 after the open. The 52-week range is $72.16 to $89.30, and analysts had a 12-month price target of $85.95 before this morning’s report.

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