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Gas glut weighs on oil giants



The world's largest oil companies are feeling the financial pressure from a global decline in natural gas prices.

Exxon Mobil
Corp.


XOM -1.50%

Profit in the second quarter fell 21% when reduced gas and petrochemical yields offset production growth in the US hottest oil field, the Permian Basin of Texas and New Mexico. [19659005] Chevron
Corp.


CVX -0.29%

& # 39; Net income rose 26% to $ 4.3 billion, in part due to the receipt of a fee from an agreed purchase agreement

Anadarko Petroleum
Corp.


APC -0.77%

but the company saw the prices it fetch for US natural gas fall by more than half.

Exxon's lower return on Friday mirrored similar results earlier this week from European colleagues, including

Royal Dutch Shell

PLC. Profits from the company's global natural gas segment fell by about half to $ 1.34 billion, as prices fell overseas due to ample new offers from projects around the world. Shell said its quarterly profit fell by half to about $ 3 billion.

Natural gas prices have fallen due to concerns over a wealth of cleaner fuels, driven by strong production in the Permian basin and new export projects. everything from the Texas Gulf Coast to Papua New Guinea. The abundance of fuel has pushed down the prices of liquefied natural gas as several companies seek to sell cargoes worldwide.

Oil prices continue to be unstable due to demand and geopolitical concerns. The US crude oil scale fell 7.9% to $ 53.95 a barrel Thursday, but jumped back somewhat Friday morning, up 3%.

Exxon, one of the largest natural gas producers in the United States, warned on July 1 that second-quarter earnings would fall by as much as $ 600 million due to price declines. Slate companies have also suffered due to the fall in prices.

Shares i

Whiting Petroleum
Corp

fell 39% Thursday after the company revealed a production decline. It said it collected only 47 cents per thousand cubic feet of gas during the second quarter, down 64% from the same period last year. Whiting had to package production growth as North Dakota limited how much natural gas companies could burn off, a process known as flaring.

”CEO Brad Holly told investors. The company said this week that it has slashed the workforce by 33%, joining other shipping companies that

Pioneer Natural Resources
Co.


PXD 0.59%

to reduce costs.

Other shipping companies are experiencing operational problems.

Concho Resources
Inc.

Shares fell 22% Thursday after revealing disappointing production from wells it had drilled too closely together, a growing problem in the shale drilling sector.

The United States has more than doubled its crude production over the past decade. Much of the growth is due to the Permian Basin of West Texas and New Mexico. WSJ tracks the hotspot in North America's crude oil boom, with a glance at the challenges faced by producers in the region.

Exxon, bolstered by its drilling operation in Perm, said production increased by about 7% from a year ago. But revenues fell 21% to $ 3.13 billion, or $ 0.73 per share. It beat analysts' expectations, though they would be missed without a one-time $ 500 million tax benefit stemming from a tax change in the Canadian province of Alberta.

The US natural gas reference price fell by about 10% in the three months ended June to an average of $ 2.51 per million UK thermal units, according to FactSet. The price has continued to fall through July even when a US heat wave led to an increase in demand for power plants. In some regions, such as in West Texas, natural gas has even sold at a negative value, which means that manufacturers have to pay pipeline companies to process and ship the item.

U.S. Gas production rose to a record of more than 37 trillion cubic feet last year, up 44% from a decade earlier.

At Exxon, revenue fell 6% to $ 69.09 billion, above the consensus forecast of $ 63.6 billion. Capital expenditure and exploration increased by 22% to $ 8.08 billion, partly due to an increase in spending and activity in the Permian basin.

Exxon had previously stated that revenues would fall in the second quarter due to lower prices and more maintenance costs. Some analysts said the results were even more overwhelming in light of previous disclosures.

"They already missed lowered expectations in all segments," said Jennifer Rowland, an analyst at Edward Jones.

Exxon executives noted that prices and margins for three of the four main businesses were close to 10 years low, but the company still has the financial ability to invest in new projects.

"We are in a unique position against the rest of the industry," Exxon Senior Vice President Sa Neil Chapman. "We have the financial capacity to sustain our plans."

Chevron's production increased 9% to more than 3 million barrels of oil and gas a day, a record driven by activity in the Permian Basin and San Ramon, California, the company's Wheatstone natural gas export project in Australia.

Sales fell 10% to $ 36 billion, and capital expenditure in the first six months of the year increased by 9% to $ 10 billion.

Exxon shares fell about 1.5% in trading on Friday morning. They were down 9.3% over the past 12 months.

Chevron shares fell about 1.4% Friday morning. The company's share price has fallen around 2.7% over the past year.

Write to Bradley Olson at Bradley.Olson@wsj.com

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