Exxon
Mobil reported a slump in third-quarter profit from the prior year but announced plans on Friday to raise its dividend. The oil major said its refineries were recording higher throughput than any third quarter since 1999.
Exxon
(ticker: XOM) reported a third-quarter net profit of $9.1 billion, down from $19.7 billion for the same period a year earlier, when profits were boosted from high prices due to the war in Ukraine. Adjusted quarterly earnings came to $2.27 a share.
Cash flow from operations was $16.0 billion, up $6.6 billion from the preceding quarter.
“Results improved with strong operating performance, including record third-quarter refining throughput as well as a higher crude price and industry refining margin environment,” the company said in a statement.
The company said it will increase its fourth-quarter dividend to 95 cents a share from 91 cents previously.
The oil company produced 3.7 million barrels of oil a day for the quarter, in line with expectations. Exxon said its full-year capital and exploration spending is expected to be at the top end of its $23 billion to $25 billion guidance.
The stock was up 0.2% in premarket trading on Friday.
This is breaking news. Read a preview of Exxon Mobil’s earnings below and check back for more analysis soon.
Exxon Mobil
is already the world’s largest non-government-controlled oil company. But it’s on the cusp of a new growth spurt, as it preps to boost its oil production to 5 million barrels per day by 2027, up from 3.6 million in its latest quarter. When Exxon reports third-quarter earnings on Friday, analysts expect to see more progress on that goal, with the daily figure hitting 3.7 million barrels. By the third quarter next year, it’s expected to be at 4.3 million.
But even as its production grows, Exxon’s earnings are likely to stagnate. In the third quarter, the company’s earnings per share are set to fall to $2.37 from $4.45 last year, when Exxon benefited from high prices due to the war in Ukraine. In fact, analysts think Exxon’s earnings will be stuck within a range of $2 to $2.50 for each of the next six quarters.
All that points to the company’s dilemma, at least when it comes to impressing Wall Street. While Exxon has explained its rationale for growing—the world will still need oil even as the energy transition accelerates—investors are less interested in production growth. They liked it when Exxon was keeping production steady over the last two years while becoming more efficient and shareholder-friendly. Over that time, Exxon has been able to pay back a substantial portion of its debt and consistently boost its dividend. But rapid production growth presents new risks that could hold back the growth of its dividends and buybacks.
“While we believe Exxon Mobil will have sufficient cash flow to fully support its dividend and execute its existing share-repurchase program, we expect its total cash returns (dividends and share repurchases) to be lower than its peers,” wrote Edward Jones analyst Nick Hummel. Exxon’s dividend yield is 3.4%.
Chevron’s
(CVX) is at 3.9% and
ConocoPhillips
’ (COP) is at 3.8%. Hummel rates Exxon stock at Hold.
Exxon was trading around $107 on Thursday, down 11% from the record high of $120.70 it hit in September.
The company’s biggest growth engines now are in the U.S. Permian Basin and offshore Guyana, where it is drilling for oil in an area that’s expected to hold billions of barrels. Exxon agreed this month to buy
Pioneer Natural Resources
(PXD), a major shale-oil producer that will help Exxon become the clear dominant player in the Permian.
Although Exxon paid a modest premium for Pioneer and is paying for it all in stock—reducing the risk of taking on debt to make the deal—oil and gas acquisitions have historically been risky. Exxon’s decision to buy XTO Energy in 2010 resulted in multibillion-dollar losses because natural-gas prices fell.
Exxon will likely seek to reassure investors about its cash generation, and its dividends and buybacks, when it reports earnings. Whether Wall Street believes the company will determine if its stock rises after the report.
Write to Avi Salzman at [email protected] and Adam Clark at [email protected]
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