Exxon beats analyst estimates with biggest quarterly profit in a year

Exxon Mobil Corp on Friday reported its best-ever quarterly profit in more than a year, beating analysts’ estimates as demand for oil, gas, and chemicals rebounded.

The company posted its first earnings report following the board fight over its direction. The battle threw a spotlight over how oil producers are taking advantage of oil price recovery for debt reduction and boost shareholder payouts rather than investing more capital to increase production.

Exxon said its 2021 capital expenditure is expected to be at the lower end of the forecast range of $16 billion to $19 billion, announced earlier.

However, the company said it expects higher second-half planned spending on critical projects, including Guyana, Brazil, Permian basin.

“Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our products,” said Exxon CEO Darren Woods.

The Texas-based company said it had gone through a cost-cutting procedure costs in the first half of 2021 and saved $1 billion, on top of reductions of $3 billion in 2020. It is planning to achieve total cost savings of $6 billion through 2023 relative to 2019.

Exxon earned $1.10 per share in the quarter ended June 30, beating analysts’ average estimate of 99 cents per share.

The company’s shares, which have risen 43% this year after plunging during the height of the pandemic, were up less than 1% in light premarket trading.

Shareholders had in May cast out three Exxon directors for a hedge fund’s nominees promising to boost returns and better prepare the company for a low-carbon world.

Earnings from the chemicals and plastics business rose nearly five times from last year’s second quarter to $2.32 billion as demand rebounded and margins expanded.

The oil and gas production business reported an operating profit of $3.19 billion, from a loss of $1.65 billion during the peak of the pandemic when production was closed. Output fell 2% to 3.6 million oil-equivalent barrels per day during the quarter.

However, the refining and marketing business still has not recovered from the pandemic, reported a loss of $227 million hurt by weak demand for motor fuels and higher maintenance costs.

The company’s net income for the second quarter came in at $4.69 billion, compared with a loss of $1.08 billion a year ago, which included a gain related to reversing an inventory write-down. Absent the inventory change, the loss would have been $3 billion.

Picture Credit: FT