2Q profit at Exxon dips 59% to $1.7B

DALLAS -- Lower oil prices continue to punish Exxon Mobil Corp., which reported its weakest quarterly profit in nearly 17 years.

Exxon still earned $1.7 billion in the second quarter. It was, however, down 59 percent from a year ago, and per-share earnings missed Wall Street expectations.

The energy giant cited lower prices for oil and gas and weaker margins from its refining operations.

Chairman and Chief Executive Officer Rex Tillerson said Friday that the results "reflect a volatile industry environment."

The company is cutting exploration spending to manage through the lower prices.

Exxon shares had climbed nearly 30 percent since late January as crude prices rallied from a deep slump. But more recently oil prices have fallen back because of high inventories and the continued sluggish global economy. This week, U.S. oil hit a three-month low, and Exxon shares lost 4 percent through Thursday's close.

Exxon shares fell $1.25, or 1.4 percent, to close Friday at $88.95.

Exxon's report followed weak second-quarter results from BP and Shell.

While oil companies are seeing profits shrink, consumers are enjoying the benefit of cheaper energy. The average U.S. price for a gallon of regular gasoline stood at $2.14 on Friday, the lowest price since April, according to auto club AAA.

Gasoline prices are skidding because of high inventories. The decline in pump prices defies the usual pattern of higher prices during summer, when people drive more. Motorists are filling up on the cheapest July gasoline in 12 years, the auto club said.

Exxon's net income was lower than the $1.8 billion it earned in the first quarter and was the Texas-based company's smallest profit since the third quarter of 1999, when it earned $1.5 billion.

The profit equaled 41 cents per share, well below the 64 cents per share forecast from 21 analysts surveyed by FactSet. Exxon did not exclude any one-time costs from the per-share calculation.

Revenue fell 22 percent to $57.69 billion.

Exxon's production of oil and gas was nearly unchanged, but the company's capital and exploration spending tumbled 38 percent from a year earlier to $5.2 billion.

Eventually, analysts say, that kind of lower spending by Exxon and its rivals will translate into lower production, smaller supplies and higher prices for oil.

In recent weeks, Exxon announced a major oil discovery off the coast of South America and announced it would pay $2.5 billion for InterOil Corp., a deal designed to grab more of Asia's growing demand for natural gas.

Exxon competitor Chevron posted its third-straight quarterly loss on Friday.

The company lost $1.47 billion during the quarter that ended in June, compared with a profit of $571 million for the year-ago second quarter.

"The second quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world," John Watson, Chevron's chief executive officer, said in a prepared release.

Besides low oil prices, a one-time impairment of certain money-losing operations at Chevron fueled the red ink for the second quarter. The impaired assets in Chevron's upstream business for exploration, development and production aren't expected to produce enough revenue to cover their costs.

All told, Chevron recorded impairments and other noncash charges that totaled $2.8 billion.

Not every segment of Chevron's operations struggled during the second quarter, however.

"Our downstream business continued to perform well," Watson said, citing the company's refinery and retail operations that include a giant plant in Richmond, Calif., a city north of Oakland.

The energy giant's refinery and retail operations in the United States earned $537 million, but that was down 26.5 percent from a year-ago profit for the segment of $731 million.

San Ramon, Calif.-based Chevron has cut its capital spending and instituted far-reaching job cuts to help offset its revenue weakness.

Layoffs in Chevron's worldwide workforce that began in 2015 will run through the end of 2016 and eventually total 8,000 job cuts. On the day of the company's annual shareholders meeting in May, Chevron was about half-way through that effort.

"Our operating expenses and capital spending were reduced over $6 billion from the first six months of 2015," Watson said.

Chevron shares rose 69 cents, or 0.7 percent, to close Friday at $102.48.

Information for this article was contributed by David Koenig of The Associated Press and by George Avalos of the Mercury News (San Jose).

Business on 07/30/2016

Upcoming Events