By Bradley Olson, Alison Sider and Sarah Kent
Exxon Mobil Corp. reported its worst quarterly results since
1999 on Friday, the latest in a parade of woeful earnings from oil
and gas producers world-wide for the first three months of 2016 as
a global supply glut dragged down prices and ate into profits.
Yet, despite a 63% drop in profits to $1.8 billion, investors
shrugged off Exxon's performance and its shares rose less than 1%
to $88.32 -- mirroring a trend that has generally pushed oil and
gas stocks up after first-quarter earnings as crude prices this
week rise to their highest levels of the year, spurring optimism in
the industry.
Many companies including oil majors BP PLC and Total SA, and
independent producers such as Pioneer Natural Resources Co., saw
their shares rise after reporting first-quarter earnings because
they either swung to a profit or reported smaller losses than
anticipated.
Now, some executives are voicing optimism that the green shoots
of a gradual recovery may be sprouting in the oil patch, as crude
prices rise above $45 this week to their highest levels of the
year.
Global demand for crude is showing a "healthy" increase and has
begun to exceed the 10-year average, said Jeff Woodbury, Exxon's
vice president of investor relations.
"We're constructive on oil and gas demand," Mr. Woodbury said
Friday. "We've been through these down-cycles before. We built this
business to be very durable in a low-price environment."
BP said earlier this week its net loss shrunk nearly 80% from
the prior quarter. On Wednesday France's Total and Norway's Statoil
ASA said they were back in the black last quarter after suffering
losses in the last three months of 2015.
The results reflect aggressive spending cuts, including slashing
spending plans for drilling and laying off large numbers of
workers, that companies have made to cope with a nearly two-year
slump in crude prices. Along with a surge in oil prices, which have
risen more than 70% from a February low past $45 a barrel this
week, the results have helped fuel a 9% rally in energy stocks in
the S&P 500 index in the past month.
Not every company followed the trend. Chevron Corp. reported a
$725 million loss on Friday compared with a profit of $2.6 billion
in the first quarter of 2015. The greater-than-expected drop was
the first time in at least two decades that Chevron had two
consecutive quarterly losses.
Italian oil giant Eni SpA said Friday it had racked up a nearly
billion-dollar loss for the quarter, though its share price fell by
only 0.35% on Friday since the results weren't as bad as many
investors predicted.
In the U.S., the extreme belt tightening by oil companies is
finally leading to declines in crude output that are expected to
help rebalance the global market. Federal figures show U.S. oil
production fell below 9 million barrels a day a few weeks ago,
after peaking at 9.7 million in April 2015.
"The market is already looking past these results since oil is
up almost 80% from earlier lows," said Brian Youngberg, an energy
analyst with Edward Jones. "The expectation was that earnings were
going to be really bad for the entire sector, but many companies
did better."
Exxon, based in Irving, Texas, reported a profit of $1.81
billion, or 43 cents a share, down from $4.94 billion, or $1.17 a
share, a year earlier. Analysts polled by Thomson Reuters expected
a per-share profit of 31 cents. Revenue dropped 28% to $48.71
billion.
Exxon and Chevron saw profits nearly halved from their
businesses refining and processing crude into gasoline and diesel.
Those units have been critical in the past 18 months in helping the
companies weather the storm of falling prices. Refining has been
among the only profitable businesses in the industry since prices
began to fall precipitously in 2014.
It was in their businesses that explore for and produce oil and
gas where Exxon and Chevron saw their greatest losses. In the U.S.,
Exxon's shale company lost $832 million, and the overall loss
globally for those operations was the first in more than a
decade.
Chevron's exploration and production unit lost about $1.5
billion, and the company said Friday it would cut another 1,000
jobs later this year, bringing total job cuts to 8,000 employees,
or 12% of its workforce.
While the cost-slashing has helped oil and gas producers protect
their balance sheets, it has had a devastating impact on another
part of the business -- the oil-field services providers that drill
and pump wells.
Halliburton Co. took a $2.1 billion restructuring charge during
the quarter, stemming from severance costs and writing down the
value of assets and infrastructure no longer needed in the current
market. Baker Hughes Inc. reported a $981 million loss for the
quarter, on revenue that declined 21% from the previous quarter, to
$2.7 billion.
Even Schlumberger Ltd., the world's largest oil-field services
company, isn't immune. Chief Executive Paal Kibsgaard said
exploration and production companies "displayed clear signs of
operating in a full-scale cash crisis" during the first
quarter.
In North America, producers are cutting budgets by as much as
50% this year, Schlumberger said. The company expects international
spending to fall about 20%.
"This is the toughest environment we have seen for 30 years, and
it is likely to get even tougher before the market returns," Mr.
Kibsgaard said.
Erin Ailworth and Nicole Friedman contributed to this
article.
(END) Dow Jones Newswires
April 29, 2016 15:14 ET (19:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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