Oil Slump Remains a Drag on Exxon, Chevron
Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) on Friday detailed another tough quarter, although the bleak oil market turned a little brighter as commodity prices edged higher.
Energy companies have taken a beating during oil’s two-year-long slump, eliminating thousands of jobs and making other cost cuts to stem losses. Falling oil prices also ignited merger talks in the industry. General Electric (NYSE:GE) acknowledged on Thursday night that it’s discussing potential partnerships with oilfield services provider Baker Hughes (NYSE:BHI), whose proposed merger with Halliburton (NYSE:HAL) was scrapped earlier this year in the wake of regulatory pushback.
In recent weeks, crude oil has attempted a comeback amid expectations that OPEC will put a cap on production to reduce global supplies. U.S. futures rose to $51.60 a barrel to post a 52-week high on Oct. 19. Oil settled at $49.72 a barrel on Thursday, up 8% versus 2015.
The modest recovery took only some of the pressure off Exxon and Chevron.
Exxon’s third-quarter profit tumbled 38% year-over-year to $2.7 billion, which still topped the first two quarters of the year. Exxon Chairman and CEO Rex W. Tillerson warned that the “operating environment remains challenging.â€
Chevron booked a profit of $1.3 billion, a 35% drop versus the same period last year. However, it marked Chevron’s first profitable quarter of 2016, and earnings beat Wall Street estimates.
“Third quarter results, though down from a year ago, reflect an improvement from the first two quarters of this year,†Chevron Chairman and CEO John Watson said. “Our operational performance in the third quarter was strong.â€
Chevron’s average sales price per barrel of crude oil was $37, lower than last year’s $42 but up from $36 in the second quarter of 2016.
Shares of Chevron rallied around 4% on Friday morning, while Exxon retreated 1%.
Exxon also disclosed on Friday that it will need to reduce its tally of proved reserves by 4.6 billion barrels, or 19%, if oil prices remain near the current annual average. The U.S. Securities and Exchange Commission is investigating how Exxon reports the value of oil and gas wells.