Exxon signals weaker performance across the board to hurt Q4 profits

(Reuters) – Exxon Mobil signalled on Tuesday that sharply lower oil refining profits and weakness across all its businesses would reduce its fourth-quarter earnings by about $1.75 billion from the prior quarter.

The oil major also said in an SEC filing that upstream asset sales would benefit results by about $400 million, but overall impairments would cost about $600 million. The company’s filing did not specify a reason for the impairments.

Exxon’s snapshot is closely watched for clues to how other oil majors will fare when they begin releasing results this month.

Exxon is expected to post a profit of $1.76 a share for the fourth quarter, down from $2.48 a share, in the same quarter last year, according to financial firm LSEG.

Exxon’s earnings snapshot signaled profits “well below consensus,” said Biraj Borkhataria, an oil analyst with RBC Capital Markets, in a note to investors. The forecast showed “significant headwinds” in refining, he added.

The company indicated oil refining margins would cut earnings by between $300 million and $700 million from the third-quarter level. It also signaled timing effects would lop off another $500 million to $900 million.

Demand for gasoline and diesel has lagged expectations globally and the start of new oil refineries in Asia and Africa led to excess supplies in the market. U.S. fuel stockpiles grew in the quarter as refiners keep their utilization rates high and demand was weaker than expected.

Oil prices declined about 6% in the quarter ended Dec. 31 from the prior three months, and down nearly 12% from a year-ago, as traders worried about global oil demand.
The drop was partially offset by higher U.S. prices for natural gas, which were up about 30% from the prior quarter.

The industry bellwether had posted $8.6 billion in earnings for the third quarter, and an adjusted profit of $9.96 billion in the year-ago fourth quarter.

Exxon also said that lower margins in its chemicals business would lower earnings by about $400 million compared to the third quarter.

The company will release final results on Jan. 31, the filing said.

SOURCE: Reuters

Reporting by Sheila Dang; Tanay Dhumal and Vallari Srivastava in Bengaluru and Sheila Dang in Houston; Editing by Devika Syamnath and David Gregorio