(Bloomberg) — Exxon Mobil Corp. plunged the most in six months after higher-than-expected maintenance costs diminished oil-refining results.
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Exxon dropped as much as 4.2% on Friday for the worst intraday decline since it announced a $60 billion takeover of Pioneer Natural Resources Co. in October. The fall came on a day when the rest of the S&P 500 was dragged higher by blockbuster profit reports from Alphabet Inc. and Microsoft Corp.
A grab bag of mostly non-cash accounting items was behind the rare earnings miss for Exxon, which posted adjusted per-share profit that was 13 cents below the Bloomberg Consensus. Those surprises included elevated spending on refineries, lower-than-expected US production and unsettled derivative contracts.
“Any given quarter we’ll have a number of non-cash, 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.”
Expectations were high for Exxon going into earnings because it’s best-placed among peers to take advantage of a shift in investor sentiment that favors oil-production growth. But surging oil growth from Exxon’s Guyana development, which rose more than 35%, failed to lift the stock.
“Particularly weak results from international refining which failed to capture the strength in refining margins due to high turnarounds,” Kim Fustier, head of European oil and gas research at HSBC Holdings Plc, wrote in a note.
One bright spot for Exxon was cash flow from operations of $14.7 billion that came in $1 billion higher than forecasts. The company still the Federal Trade Commission to approve its $60 billion purchase of Pioneer Natural Resources Co. in the second quarter.
Read More: Exxon Expects FTC to Approve Pioneer Deal by Mid-Year, CFO Says
“We continue to work constructively with the FTC as they conduct a very thorough review and remain confident that no competition issues should hinder the transaction,” Chief Executive Officer Darren Woods said during a call with analysts.
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.
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“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 arch-rival 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.
Meanwhile, Chevron surpassed profit forecasts but fell short on free cash flow on Friday. The shares were down less than 1%.
Chevron’s 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 dropped to the equivalent of 859,000 barrels a day during the period from 867,000 in the final three months of 2023. Chief Executive Officer Mike Wirth had warned production would temporarily sag before rebounding during the second half of the year.
–With assistance from David Wethe, Mitchell Ferman and Ruth Liao.
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