Exxon Mobil, Chevrons stocks dip as leaner times arrive
By Ciara Linnane and Claudia Assis
'Sharp slowdown' for Exxon; Chevron's Permian Q3 production expected to be flat
Exxon Mobil Corp.'s and Chevron Corp.'s stocks dropped on Friday after the two integrated energy companies reported second-quarter earnings that prompted investors to worry about leaner times ahead.
Exxon shares (XOM) were leading losses among S&P 500 energy companies in midday trading, while Chevron (CVX) was the next lower.
Exxon's results "showed a sharp slowdown from the record breaking results from a year ago," said Peter McNally, an analyst with Third Bridge Group. Below-consensus per-share profits were mostly thanks to weaker volumes for Exxon's oil and gas production and weaker natural-gas prices in North America.
"This was the weakest pricing realization in ExxonMobil's [U.S. natural gas] business in at least a decade, but the company is slowing production there sharply with a 13% year-on-year decline," McNally said.
Exxon posted net income of $7.88 billion, or $1.94 a share, for the quarter, down from $17.850 billion, or $4.21 a share, in the year-earlier period. Revenue fell to $82.9 billion from $115.7 billion a year ago.
The FactSet consensus called for EPS of $2.03 and revenue of $81.803 billion for the energy giant.
The results were "disappointing on a relative basis," but also showed Exxon's "continued execution and improved unit-level profitability versus prior cycles," Raymond James' analyst Justin Jenkins said.
"Notwithstanding a hiccup in 2Q, solid operational performance has driven top-tier financial performance, allowing the balance sheet to return to 'fortress' (or better) levels, while boosting returns of cash to shareholders and delivering investment results," he said.
Chevron Corp. also earlier Friday reported full second-quarter results, after providing performance highlights on Sunday. Chevron's revenue dropped nearly 30% but topped forecasts.
Chevron's results showed year-on-year declines from last year's record-breaking period but "generally outpaced street expectations," Third Bridge's McNally said.
The company expects production in its West Texas's Permian holdings to be broadly flat in the current quarter before ticking higher by the end of the year.
Chevron's Permian comments were "largely supportive," analysts at Piper Sandler said in their note Friday.
Chevron's "headline beat" reflected strong performance in both exploration and production and chemicals, as well as a "relatively reduced" exposure to weaker natural-gas prices, they said.