Exxon, Chevron Fall as First-Quarter Earnings Miss Estimates
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Exxon Mobil Corp. and Chevron Corp. declined after disappointing first-quarter performances despite posting strong production gains in marquee oil projects in Guyana and the Permian Basin.
Exxon dropped as much as 3.2% in pre-market trading and Chevron was down 1.5% on April 26 even as crude prices rose. Exxon posted adjusted per-share profit that was 13 cents below the Bloomberg Consensus due to higher costs from maintaining refineries and a series of accounting charges. Chevron, meanwhile, incurred higher than expected capital spending that caused free cash flow to miss expectations by $900 million.
The results come amid a shift in investor sentiment that favors oil-production growth to take advantage of concerns about global supplies that have supported crude prices.
One bright spot for Exxon was cash flow from operations of $14.7 billion that came in $1 billion higher than forecasts, boosted by a substantial uplift in Guyanese crude production.
$CVX announces first quarter 2024 results: https://t.co/q7BdvrJudr — Chevron (@Chevron) April 26, 2024
“Any given quarter we’ll have a number of noncash, just a bit more unusual expenses that kind of ebb and flow,” Chief Financial Officer Kathy Mikells said in an interview. “This quarter we had a number of small ones that added up together to be more significant and that’s difficult for analysts to model.”
Exxon started output at Payara, its third Guyanese development, ahead of schedule late last year, adding 220,000 barrels of daily supplies that earn profits even if crude plunges to the $35 mark.
“We continue to bring projects in more quickly and under budget so we’ve just had great execution in Guyana,” Mikells said, noting that gross daily production is now more than 600,000 barrels, up from 440,000 in the final three months of 2023.
Exxon’s performance in Guyana underscores why archrival Chevron wants to get into the project via a $53 billion takeover of Hess Corp., which has a 30% stake. Exxon claims it has a right-of-first refusal over Hess’s stake while Chevron says that doesn’t apply because its deal is a corporate merger.
Arbitration proceedings are still in “very early days,” Mikells said. Each side has chosen one arbitrator who will sit on a panel of three, she said. Hess this week extended the closing date of its deal with Chevron by six months to October.
A heavy schedule of refinery maintenance helped drive the earnings miss, according to Biraj Borkhataira of RBC Capital Markets. Exxon’s accounting charges were noncash items associated with tax and inventory balance sheet adjustments, Mikells said.
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Exxon “has been a strong performer over recent months, and we believe investors were constructive on the name heading into results, particularly as other downstream levered names reported results ahead of expectations,” Borkhataira said. “We think today’s print could be seen as negative, with both earnings and underlying cash flow being below expectations.”
As for Chevron, adjusted first-quarter profit of $2.93 a share was 3 cents higher than the average of analyst estimates in the Bloomberg Consensus. Crude-oil output of almost 2 million barrels a day exceeded forecasts.
Chevron’s Permian Basin output was equivalent to 859,000 barrels a day during the period, down from 867,000 in the final three months of 2023.
CEO Mike Wirth had warned production would temporarily sag before rebounding during the second half of the year.
