(Reuters) – Exxon Mobil shares fell nearly 2% in early trading on Wednesday after the top U.S. oil producer warned of lower fourth-quarter refining profits and weak returns in the all of its operations.
The sector’s earnings preview points to a challenging environment as companies grapple with pricing pressure amid volatile demand.
Exxon expects fourth-quarter profit to be about $1.75 billion lower than the previous quarter.
For much of last year, Exxon and other oil majors faced reduced profitability from refining crude oil and selling petroleum products as the post-pandemic demand boom ended. The opening of large factories around the world also weighed on the growth of refining margins.
In the third quarter, Exxon’s profits fell 5% compared to the same quarter last year, while Chevron’s profits fell 21%.
Exxon’s earnings update is “consistent with revisions seen for independent refiners and other large companies with significant refining exposure,” Biraj Borkhataria, an oil analyst at RBC Capital Markets, said in a note to investors.
This snapshot will likely be viewed as “negative” and weigh on stocks in the near term, he added.
Exxon is one of the world’s largest refiners, with a total refining capacity of 4.5 million barrels of oil per day, and is also one of the world’s largest manufacturers of commodity and specialty chemicals.
The company is expected to earn $1.76 per share in the fourth quarter, according to data compiled by LSEG. The oil major posted earnings of $2.48 per share a year earlier.
Exxon has a price-to-earnings (PE) ratio of 13.56, compared to Chevron’s 16.43. A lower PE multiple indicates a more attractive investment opportunity.
Exxon shares are up 7.6% in 2024, underperforming the S&P 500’s 23.3% gain.
(Reporting by Mrinalika Roy in Bangalore; Editing by Sriraj Kalluvila)
