Exxon Mobil Second-Quarter Profit Climbs After Oil Prices Rise
Exxon Profit Rises Most Since 2003 as Output Climbs
Ty Wright/Bloomberg
Exxon Mobil Corp. reported better-than-estimated profit so far in the second-quarter reporting season.
Exxon Mobil Corp. reported better-than-estimated profit so far in the second-quarter reporting season. Photographer: Ty Wright/Bloomberg
July 29 (Bloomberg) -- Pavel Molchanov, an energy analyst at Raymond James & Associates, discusses Exxon Mobil Corp.’s second-quarter profit reported today and the outlook for the company’s performance. The largest U.S. oil company said net income jumped 91 percent to $7.56 billion, or $1.60 a share, exceeding analyst estimates. Molchanov speaks with Carol Massar and Scarlet Fu on Bloomberg Television’s “In the Loop With Betty Liu.” (Source: Bloomberg)
Exxon Mobil Corp. posted its biggest profit increase since 2003, exceeding analysts’ estimates, as rising production helped the largest U.S. oil company take advantage of gains in energy prices.
Second-quarter net income jumped 91 percent to $7.56 billion, or $1.60 a share, from $3.95 billion, or 81 cents, a year earlier, Irving, Texas-based Exxon said today in a statement. Per-share profit was 15 cents higher than the average of 17 analysts’ estimates compiled by Bloomberg.
Exxon and Royal Dutch Shell Plc, Europe’s biggest energy company, capitalized on jumps in oil and fuel prices by boosting production. Exxon’s output climbed 8.4 percent to the equivalent of 4 million barrels of oil a day. Chief Executive Officer Rex Tillerson ramped up capital spending to more than $70 million a day since 2008, ending a slide that left production at the lowest level since the 1999 acquisition of Mobil Corp.
“The law of large numbers says the bigger you are, the harder it is to grow,” said Philip Weiss, an analyst at Argus Research in New York who has a “buy” rating on Exxon shares and doesn’t own any. “If they can deliver higher production, that’s a big plus because that means that they’re going to be delivering more income and cash flow.”
Exxon, which rose as much as 1.6 percent after its earnings report was released this morning, fell 57 cents to $60.34 as of the 4 p.m. close of New York Stock Exchange composite trading. Shell dropped 0.2 percent in London. Exxon has 12 buy ratings from analysts, 11 holds and 1 sell.
Profit Gains
Exxon’s profit increase was its largest since the first quarter of 2003. Revenue rose 24 percent to $92.5 billion.
Shell, based in The Hague, said today that its profit rose 15 percent to $4.39 billion, and the company reported a 5 percent gain in output.
Worldwide demand for crude in the second quarter rose an estimated 3.2 percent from a year earlier, according to the International Energy Agency in Paris. U.S. crude-oil futures averaged $78.05 a barrel, up 31 percent.
Profit from oil and natural-gas wells at Exxon jumped 40 percent to $5.34 billion in the second quarter. Refining earnings more than doubled to $1.22 billion, and profit from chemicals plants more than tripled, the company said.
“The production growth was the strongest in a while,” said Brian Youngberg, an analyst at Edward Jones in St. Louis who has a “hold” rating on Exxon shares and doesn’t own any. “You combine that with refining margins being up in the industry and higher commodity prices, Exxon Mobil, like its peers, beat expectations.”
XTO Acquisition
Exxon said July 8 that it plans to buy back $3 billion of its shares this quarter following its acquisition last month of natural-gas producer XTO Energy Inc. The transaction increased outstanding shares at Exxon by about 9 percent. Exxon also said it will look to pay off or refinance $11 billion of assumed debt.
Exxon has said the XTO deal is a long-term bet that gas from shale formations and other so-called unconventional resources will meet rising U.S. demand through at least 2030 as output from conventional wells falls.
“They’re going to take their XTO expertise and redeploy them in their own properties and try to get more bang for their bucks, and that’s what they are very well known for,” said Fadel Gheit, an analyst at Oppenheimer & Co. in New York who has a “market perform” rating on Exxon shares. He said low gas prices have prevented the deal from helping the company’s stock.
Chevron Corp., the second-largest U.S. energy company, is scheduled to report earnings tomorrow.
To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.
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