Exxon stock falls on earnings Miss. Quarter includes Russia’s costs of $ 3.4 billion.
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Exxon Mobile posted first-quarter adjusted earnings that missed forecasts and the stock fell in pre-market trading on Friday.
Exxon (ticker: XOM) reported adjusted earnings of $ 2.07 per share, below forecasts of $ 2.23 per share. The quarter included costs of $ 3.4 billion, or 79 cents per share, from the company’s exit from Russia.
Shares of Exxon fell 0.9% to $ 86.42 on Friday. The share has risen 41.2 percent this year.
Net income for the period was $ 5.5 billion or $ 1.28 per share. Turnover for the period was $ 90.5 billion, higher than analysts’ forecasts of $ 82.8 billion, according to FactSet. Years earlier, revenues were nearly $ 59.2 billion.
In an interview with BarronsExxon Chief Financial Officer Kathy Mikells said the loss of earnings was largely due to a change in the value of derivatives the company uses to hedge in its refining operations. The dramatic change in oil prices during the quarter – with crude oil trading as high as $ 130 per barrel – had a major impact on energy derivatives markets. Marking the assets at market prices had a negative impact of $ 760 million on Exxon’s earnings in the quarter, which Mikells said is “quite typical in a steeply rising price environment.”
The absence of these changes and some unexpected weather problems in Canada, the company’s core business performed well, Mikells said.
“It was a strong quarter when we look at the underlying business results, disregarding weather and time impacts, and we carry very strong momentum into the second quarter,” said Mikells.
The company produced 3.7 million barrels per day, a decrease of 4% from the fourth quarter of 2021 due to weather-related delays, scheduled maintenance, lower rights related to higher prices and disposals.
“Revenues increased modestly, as strong margin improvement and underlying growth were offset by weather and time impacts,” CEO Darren Woods said in a statement. “The absence of these temporary effects in March provides strong, positive momentum for the second quarter.”
Structural savings were more than $ 5 billion for the quarter compared to 2019, and the company is on track to exceed $ 9 billion in annual savings by 2023, Exxon said.
As we enter the second quarter of 2022, Exxon expects operating and financing costs to be around $ 600 million.
Exxon increased its share buyback program to up to $ 30 billion through 2023, from the previous plan to buy back $ 10 billion in shares. With the current share price, it will amount to around 8% of the shares. Mikells said the company has made progress in reducing its debt and is now at the low end of the debt-to-capital ratio target. “We feel very good about our strong balance sheet and liquidity position and the sustained momentum we see in the business,” she said.
Citi analyst Alastair Syme wrote that high oil prices and relatively low expenses give Exxon “a lot of financial flexibility”.
The CFRA maintained a buy rating on the stock, with analyst Stewart Glickman saying he saw catalysts in the short term as the oil producer made progress in development in Guyana and the Permian Basin.
The company declared a cash dividend earlier this week of 88 cents per share, the same level as the dividend in the first quarter. Exxon had increased dividends since October until this quarter, following a pandemic break.
Competitor
Chevron (
CVX) also reported earnings on Friday, with a loss of earnings on an adjusted basis.
Chevron and Exxon’s worse-than-expected results came as a surprise on Friday, as analysts expected a strong quarter across the board for oil companies driven by higher prices. Oil service providers
Halliburton (
HAL),
Schlumberger (
SLB), and
Barn Morgan (
KMI) beat all expectations when they reported earnings.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
