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  HOME | Oil, Mining & Energy (Click here for more)

Slim Margins Contribute To Exxon, Chevron Profit Plunge

NEW YORK – The United States’ two largest energy companies, ExxonMobil and Chevron, suffered a steep drop in profits in 2019, hampered by lower prices of crude and natural gas, as well as excess supply that has affected the margins of their downstream and chemical businesses.

The No. 1 US oil and gas producer by revenue, Exxon, posted net income of $14.34 billion and revenue of $264.94 billion, down 31 percent and 9 percent, respectively, from 2018, it said in an earnings statement on Friday.

Weakness in the Irving, Texas-based company’s downstream business - the refining of crude oil and processing and purifying of natural gas - were a main driver of those results.

“Our operations performed well, while short-term supply length in the downstream and chemicals businesses impacted margins and financial results,” said CEO Darren Woods, whose plan to boost earnings and output through increased capital expenditures - announced two years ago - has not yet borne fruit.

Capital and exploration expenditures rose 20 percent in 2019 to more than $31 billion but did not produce a jump in oil-equivalent production, which came in at 3.95 million barrels per day, up just 3 percent from 2018.

In the fourth quarter, Exxon’s net income fell 5 percent year over year to $5.69 billion and its total revenues slipped 6.6 percent to $67.17 billion.

Exxon said its fourth-quarter earnings included a $3.7 billion gain from the sale of its upstream assets in Norway, while its capital and exploration expenditures in that three-month period amounted to $8.5 billion, “including key investments in the Permian Basin.”

Referring to a growing global supply glut and lower oil and gas prices, Woods said in a conference call that the fossil fuels industry is facing “extremely challenging market conditions” but that “investing in the trough of this cycle has some real advantages.”

For its part, Chevron, the US’s second-largest energy group, posted a steep 81 percent drop in net income, which totaled $2.85 billion in 2019. Total revenues, meanwhile, amounted to $146.51 billion, a 9 percent decline.

The annual net income figure mainly reflected a $6.67 billion net loss in the fourth quarter due to previously announced upstream impairments and write-offs totaling $10.4 billion associated with Appalachia shale and deepwater Gulf of Mexico projects.

Total revenues in the fourth quarter fell 14 percent to $36.35 billion; that result reflected the impact of price fluctuations, since the company’s oil-equivalent production of 3.08 billion barrels per day was virtually unchanged from the same period of 2018.

“The company’s average sales price per barrel of crude oil and natural gas liquids was $47 in fourth quarter 2019, down from $56 a year earlier,” Chevron said in its earnings statement on Friday.

Chevron CEO Michael Wirth expressed satisfaction with the company’s new output milestone in 2019 - worldwide net oil-equivalent production of more than 3 million barrels per day - and said cash flow from operations remained strong.

“We paid $9 billion in dividends, repurchased $4 billion of shares, funded our capital program and successfully captured several inorganic investment opportunities, all while reducing debt by more than $7 billion,” he said.

Investors reacted negatively to the companies’ latest earnings statements.

On a day in which the Dow Jones Industrial Average was nearly 2 percent lower due in large part to fears about the spread of the coronavirus, shares of Exxon and Chevron were both down more than 4 percent in late trading on the New York Stock Exchange.

 

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