Exxon Stumbles on Production, Higher Costs (XOM, CVX, COP, BP, TOT, CHK)

Exxon reported adjusted EPS of $2.00/share, below the consensus estimate of $2.09 and further below EPS of $2.14 in the same period a year ago. Revenue came in at $124.05 billion, also below the estimate of $124.76 billion, but about 8.8% higher than last year’s revenue of $114 billion. Net cash flow improved from $16.9 billion a year ago to $19.3 billion this year, due almost entirely to higher prices for crude oil.

The problem is that Exxon did not produce as much crude this year. Worldwide production totaled 2.214 million barrels/day of crude and natural gas liquids, down -7.7% from last year’s production of 2.399 million barrels/day. Worldwide natural gas production was also down -3.3%, and in the US natural gas production was up only about 1%.

Profits from the company’s upstream segment (exploration and production) were substantially lower:

Upstream earnings were $7,802 million, down $873 million from the first quarter of 2011. Higher liquids and natural gas realizations increased earnings by $980 million. Lower sales volumes decreased earnings by $850 million. All other items, primarily higher operating expenses and the absence of gains on asset sales, decreased earnings by $1.0 billion.

In the downstream segment (refining and marketing), profits rose $487 million, the largest part of which was asset sales of $320 million. International refining profits more than doubled, while US refining profits fell by -13%. And higher costs eroded profits here, too, by $40 million. Fortunately for Exxon, refined product sales of 6.3 million barrels/day at higher prices saved the day.

Both Exxon and Chevron announced dividend hikes earlier this week. Exxon is raising its dividend 21% to $0.57/share/quarter and Chevron is hiking its dividend by 11% to $0.90/share/quarter. Exxon also noted today that it would buy back $5 billion worth of common stock in the second quarter.

The two companies are not feeling particularly generous, of course. They are trying to keep investors happy in the face of lower profits. Don’t expect Chevron to beat its EPS estimate of $3.26 when it reports results tomorrow.

Exxon’s shares are down -1.3% in the pre-market at $85.70 in a 52-week range of $67.03-$88.13.

Paul Ausick