Exxon profit slips due to low gas prices, weak margins

Business

In this Jan. 28, 2020, photo a Mobil sign is affixed to an Exxon Mobil fuel pump in Marlborough, Mass. Exxon Mobil Corp. reports financial results Friday, Jan. 31. (AP Photo/Bill Sikes)

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

Exxon Mobil’s profit slid more than 5% in the fourth quarter of 2019, as the oil giant dealt with low natural gas prices and weak margins in its chemical and retail fuel operations.

The country’s largest oil producer posted $5.69 billion in profits, or $1.33 per share, for the quarter. But those profits were boosted by a one-time sale of non-strategic assets in Norway, which lifted earnings by 92 cents per share. Removing the asset sale, per-share profit was 41 cents, shy of the 44 cents analysts polled by Zacks Investment Research were looking for.

A year earlier the Irving, Texas, company earned $6 billion, or $1.41 per share.

Revenue reached $67.17 billion, which was down from $71.9 billion a year earlier.

“There’s no doubt that 2019 was a challenging year for a number of our businesses…near or at 10-year lows for price and margins for gas, refining and chemicals,” said Darren Woods, chairman and CEO of Exxon, on a conference call with investors.

In Exxon’s chemical business, depressed margins were driven by excess capacity, Woods said.

But Woods struck an optimistic note, saying across the board, “demand fundamentals remain strong, supported by a growing population, economic expansion and higher standards of living.”

The U.S. has been producing historically high levels of natural gas, driven by the fracking boom, and the price hovered around $1.85 per million British thermal units on Friday. At the same time, some communities are curtailing natural gas use and even barring new hookups as governments aim to replace fossil fuels with renewable sources of energy.

Oil prices have fluctuated widely throughout the year, as tensions in the Middle East and sanctions in Venezuela disrupted global oil supply, while fears of a global economic slowdown put a damper on demand. Crude prices have fallen about 15% since an Iranian missile attack earlier this month on two military bases in Iraq housing American troops.

The spread of the coronavirus from China to other regions may also drive down energy demand as people and corporations reduce travel, particularly to China. While the situation remains in flux, analysts say global oil demand could be weaker than previous estimates, at least in the short term.

The impact from China could be greater, even if this outbreak is not as serious as the SARS outbreak that emerged in 2002. China made up 16.3% of the world economic output last year, according to the International Monetary Fund. When the SARS outbreak struck nearly two decades ago, China accounted for only 4.3%.

At Exxon, oil-equivalent production was in line with a year ago, at 4 million barrels per day. A 4% increase in liquids was offset by a 5% decrease in gas. Liquids production rose 2% on Permian Basin growth, while natural gas volumes fell 4%, excluding entitlement effects and divestments.

Woods touted that Exxon started extracting oil in Guyana ahead of schedule and upped the estimated supply from the offshore oil field to as great as 8 billion oil-equivalent barrels.

“Reaching first oil in Guyana was a major achievement for all steakeholders and is the culmination of years of hard work,” Woods said.

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Latest Videos

More Local

Don't Miss