Daily Management Review

Tough Year Signals For Oil Producers Shown By Results Of Exxon And Chevron


Tough Year Signals For Oil Producers Shown By Results Of Exxon And Chevron
Signals that the 2020 could be a tough year for the oil companies were seen in the quarterly results of the two largest oil producers of the United States - Exxon Mobil Corp and Chevron Corp, both of which reported earnings sharply lower than market estimates. This was blamed on weaker crude oil and gas prices.
Both the companies blamed their poor performance on weaker margins in crude oil, chemicals and fuel production even though the companies’ performance and earnings were also affected by one-time asset sales or write downs which were significantly large factors. Both the companies were also very conservative while forecasting performance in the near term.
There was a drop of 3 per cent in the share of both Exxon and Chevron in morning trade after the less than expected results were announced by the companies as well as because of concerns about a slowdown in the global economy.
For Exxon, the Wall Street had recently lowered its estimate which was also missed by the company for the fourth quarter. The company’s earnings came in at $5.6 billion compared to $6 billion in the same quarter a year ago. Compared to Wall Street's estimate of 43 cents and 71 cents prior to a recent warning, the company’s per share profit excluding one-time gain from asset sales was lower than expected at 41 cents.
Compared to a profit made by Chevron in the fourth quarter of 2018, the company sunk into a loss of $6.61 billion for the quarter.  The onetime charges that the company took during the quarter of $10 billion which included writedowns on the value of oil and gas properties that were no longer economic to pump hit the its earnings. The company reported a $1.49 cent a share profit excluding charges which was more than what the markets were expecting.
Earlier this week, Royal Dutch Shell pulled back from its previous announcement of share buybacks because of slowdown in growth and weak commodity prices which resulted in the shares of the company reaching a three year low.
The market price of the natural gas, refining and chemicals businesses have been close to or at prices that were the lowest in a decade which hit the company’s earnings significantly, said Exxon CEO Darren Woods. However he assured that the company will continue to invest in new projects because the margin weakness, according to him, was "a short-term impact."