Exxon Mobil Reports Third Quarter Earnings

By Shariq Khan and Gary McWilliams

HOUSTON (Reuters) – Exxon Mobil on Friday reported that it surpassed Wall Street's profit estimates for the third quarter, driven by robust oil production in its first full quarter including volumes from U.S. shale producer Pioneer Natural Resources (NYSE:PXD).

Despite the oil industry's challenges this year from declining demand and weak margins on gasoline and diesel, Exxon (NYSE:XOM) experienced a smaller profit decline of 5% year-over-year, outperforming competitors BP (NYSE:BP) and TotalEnergies (EPA:TTEF).

The leading U.S. oil producer recorded an income of $8.61 billion, down from $9.07 billion the previous year, but its profit of $1.92 per share exceeded expectations of $1.88 per share, backed by elevated oil and gas production as well as spending discipline.

Finance chief Kathryn Mikells noted, "We had a number of production records" in the quarter, reporting an approximate 25% year-on-year increase in oil and gas output to 4.6 million barrels per day.

Following the earnings report, Exxon's shares rose by about 1.3% in premarket trading to $118.25.

Earlier in the month, Exxon warned that its operating profit was likely to decline, prompting analysts to revise their quarterly per share earnings forecasts downward.

The earnings report also reflected Exxon's first complete quarter of production post its $60 billion acquisition of Pioneer Natural Resources in May, which escalated output in the top U.S. shale basin to nearly 1.4 million barrels per day, offsetting a 17% year-over-year decline in average oil prices for the quarter ending Sept. 30.

The company anticipates full-year production to average around 4.3 million barrels of oil equivalent per day (boepd), including eight months of Pioneer’s contributions.

In contrast, Chevron (NYSE:CVX), the second-largest U.S. oil producer, also surpassed Wall Street forecasts despite lower year-over-year earnings, with its shares rising 2.2% in premarket trading.

Exxon plans to update its production forecasts next month, but it also acknowledged that scheduled well maintenance will reduce oil and gas output by approximately 30,000 boepd in the fourth quarter.

Market concerns persist over oil supply potentially outpacing demand next year, especially with OPEC reviewing plans to increase oil supply by 180,000 barrels per day (bpd) from December. Following a summer slump, oil prices remain about 12% below their June average.

Exxon also announced a 4% increase in its quarterly dividend after generating $11.3 billion in free cash flow, significantly exceeding analyst estimates. In comparison, rivals Saudi Aramco (TADAWUL:2222) and Chevron had to borrow funds this year to maintain shareholder returns following increased dividends and buybacks to attract investors.

The company's earnings from gasoline and diesel production were $1.31 billion for the quarter, a decline from $2.44 billion year-over-year, largely affected by weak margins and a nearly month-long outage at its 251,800-bpd Illinois refinery.

However, reduced planned maintenance at other plants and gains on derivatives helped mitigate the industry's weak refining margins and impacts of the Illinois outage, as stated by Exxon. CFO Mikells commented, "Refining margins definitely came down in the quarter. If you look at overall results for the refining business, we feel pretty good," citing a doubling of per unit refining margins on a constant margin basis since 2019.

Profits from Exxon's chemical segment rose to $893 million in the quarter, up from $249 million a year ago, aided by a slight increase in margins despite ongoing industry overcapacity.

"We are in a much better position (in chemicals) because we have a strong Gulf Coast footprint that benefits from Gulf Coast (natural gas) prices," Mikells added.