By Sabrina Valle
HOUSTON (Reuters) – Exxon Mobil Corp missed analysts’ estimates on Friday with a 28 percent drop in first-quarter profit from a year earlier as weak refining margins and falling natural gas prices offset gains in volume.
America’s largest oil company, which is in the process of closing a $60 billion deal with major shale oil producer Pioneer Natural Resources, reported first-quarter net profit of $8.22 billion, or 2 .06 per share, compared to net income of $11.43 billion a year ago. .
Earnings per share fell 6% from Wall Street analysts’ consensus, according to LSEG estimates.
Those results were the second highest for a first quarter in the last decade, behind those of last year, said Kathryn Mikells, chief financial officer. This failure was due in part to adjustments to the tax balance sheet and inventory, she said.
“Every quarter we see pros and cons associated with these one-time items,” she said. “Sometimes they are supportive, this time they were unfavorable.”
Lower energy margins reduced operating profit by about $2.6 billion from last year. Global oil prices remained broadly stable compared to a year ago, while natural gas prices fell sharply. U.S. gas futures were trading down 20% at the end of the quarter from a year earlier.
The results were boosted by lower costs and higher volumes from Exxon’s operations in Guyana. Hess had reported a day earlier an increase in production in the South American country, with a 70% year-on-year production gain.
Exxon’s capital spending last quarter was the lowest in seven quarters and streamlining its operations increased what it calls structural cost savings by $400 million.
It added $1.7 billion in cash last quarter to end the period with $33.3 billion.
CLOSURE OF THE CASE
Exxon’s acquisition of Pioneer is expected to close in the coming weeks. Exxon began the integration process with a team working separately from the company, Mikells said.
“We are really pleased with our interactions with the folks at Pioneer and we are making sure we do our best as we close this transaction,” she said.
Pioneer’s all-stock deal would make Exxon the largest oil and gas producer in America’s major shale play, doubling its output to more than 1.3 million barrels of oil equivalent per day. Exxon predicts that this combination will allow it to reach 2 million barrels per day in 2027.
The deal was the largest in a series of blockbuster tie-ups in recent years, as companies such as Pioneer, Endeavor Energy and CrownRock were acquired by larger companies seeking to secure years of future production and achieve economies of scale through the expansion of their operations.
Pioneer shares were trading this week at $275 each, a 9% increase from October’s trading value.
HESS ARBITRATION
Exxon is in a dispute with Chevron and Hess over assets in Guyana, home to the largest oil discoveries of the past two decades. Faced with Chevron’s $53 billion bid for Hess, Exxon claimed pre-emptive rights to Hess’ assets in Guyana. This statement is…
