Exxon Mobil posted a profit of $10.9 billion in the first quarter which is a 17 percent increase. It is the world’s largest publicly traded oil company.
But even this second-most profitable quarter in its history couldn’t prevent investors from disappointment because of a drop in oil production.
Shares were down more than 3 percent Thursday after the company missed earnings estimates by a dime a share.
BP, Royal Dutch Shell and ConocoPhillips all reporting big gains this week. Most of these gains came as oil prices averaged nearly $100 a barrel in the first quarter, compared with $58 in the period a year ago. They recently rose to close at $120 a barrel.
Oil companies’ profit has been lifted with record oil prices but it is also masking an increasingly tough business environment for international companies, marked chiefly by rising development costs and stagnating hydrocarbon production. In the refining business, profit margins have plummeted as refiners have been unable to pass through all the increases in oil prices onto gasoline.
The higher prices have also translated into sharp inflation in the industry, with drilling and production costs more than doubling in recent years. As a result, oil companies have been struggling to increase their oil and gas production.
As compared to its rivals Exxon did not do as well. The company said that its net income in the first quarter was $10.9 billion or $2.03 a share, up from $9.3 billion, or $1.62 a share a year ago. Analysts surveyed by Thomson Financial had forecast $2.13 a share. After the earnings were released, the stock dropped as low as $89.41 after closing at $93.07 in regular trading Wednesday.
William A. Featherston, an analyst at UBS AG (Swiss Bank), said the results were “disappointing” compared with those of BP and Shell.
In particular, investors focused on a drop in production from Exxon’s operations, because of a nationalization of its assets in Venezuela, declines in the United States and Canada and lower volumes in Africa.
According to Paul Sankey, an analyst with Deutsche Bank:
Deeply concerned about future energy supply, the market wants growth, growth and growth. Exxon Mobil does not offer that right now.
Exxon said that lower refining margins had dropped by $1 billion in the last quarter, pushing its profits from refining operations down 39 percent, to $1.17 billion from the quarter a year ago. The drop in profitability was partly offset by improvements from operations of $350 million. Exxon sold 6.8 million barrels a day of petroleum products, down 377,000 barrels a day.
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