Exxon Earnings Disaster Down to Refining

Excluding a one-time net gain of $7.5 billion in the second quarter of 2012, Exxon’s 2013 second quarter earnings are down by 19%. The company blames weaker refining margins and volumes.

Production fell nearly 2% worldwide on an oil-equivalent basis. Exxon said that excluding the impact of entitlement volumes, OPEC quotas and divestments, production was flat with the year-ago quarter.

Worldwide production of oil and other liquids was down 26,000 barrels a day year-over-year. U.S. liquids production was flat year-over-year at 419,000 barrels a day, but down from 435,000 barrels a day in the first quarter.

U.S. natural gas production fell by about 316 million cubic feet a day after dropping by about 350 million cubic feet a day in the first quarter. Upstream profits in the United States rose from $678 million in the second quarter of 2012 to $1.1 billion. Non-U.S. profits fell from $7.68 billion a year ago to $5.21 billion in the second quarter of 2013.

Refining only added to Exxon’s woes in the second quarter. Throughput in the United States was flat with last year, but down nearly 500,000 barrels a day worldwide. U.S. downstream profits fell from $834 million a year ago to $248 million this year. Non-U.S. profits fell from $5.81 billion to $148 million. That is not a typo. Downstream earnings fell $5.66 billion year-over-year.

The earnings announcement did not include guidance, but the consensus estimate for the third quarter calls for EPS of $1.96 on revenues of $107.3 billion. For the full year, EPS and revenues are estimated at $7.96 and $426.68 billion, respectively.

The company’s CEO said:

ExxonMobil’s second quarter results reflect continued strong operational performance and investments to meet growing demand for oil, natural gas and chemical products in the years ahead. … [Exxon] distributed $6.8 billion to shareholders in the second quarter through dividends and share purchases to reduce shares outstanding.

It does not appear that Exxon’s management has quite figured out what to do about falling revenues and profits, except to mollify shareholders with stock buybacks.

Exxon’s shares are down 1.4% in premarket trading, at $92.44 in a 52-week range of $84.70 to $95.49. Thomson Reuters had a consensus analyst price target of around $95.80 before today’s report.