ExxonMobil and Shell Stumble on Refining Troubles

Michael Teague  |

The top tier of major integrated oil and gas companies have been reporting earnings this week. On Wednesday, BP Plc’s (BP) released numbers for the recently ended period, an on Thursday, ExxonMobil (XOM) and Royal Dutch Shell ($RDS.A) joined in, posting third-quarter 2013 results that showed both struggling over different aspects of their respective refining operations.

ExxonMobil reported its first increase in oil and gas output since Q2 2011, a 1.5 percent jump to just over 4 million barrels per day. But earnings had dropped on a year-over-year basis, with net income of $7.87 billion, $1.79 per share, versus the year-prior period during which the company netter $9.57 billion, or $2.09 per share. Revenue for Q3 was $112.37 billion, also down from the previous year’s $127.32 billion, but the company came in ahead of estimates for earnings of $1.78 per share on revenue of $106 billion.

The company even quadrupled profits in its chemical units to over $1 billion. The problem, however, was with Exxon’s downstream segment, where refining margins absolutely tanked, dropping nearly 80 percent from the prior year, to come in just shy of $600 million.

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Investors were happy with the company’s performance overall, and were able to forgive the downstream segment. ExxonMobil, after all, is and has always been an upstream company anyway, and in a global energy economy that is becoming almost entirely focused on shale, it did not go unnoticed that production of old-fashioned crude was actually up while natural gas production shed a little bit. Ahead of the closing bell, shares were trading over a 1.5 percent higher at $90.26.

Exxon’s European counterpart, Royal Dutch Shell ($RDS.A) had considerably less exciting things to say about its own third-quarter, however. It had to deal with the same weaker demand for downstream products as Exxon, but its profits were more significantly impacted as a result of disruption to production at its Nigerian prospects.

Europe’s largest oil firm reported adjusted earnings for the period of $4.68 billion, or $1.43 per share on revenue of $116.5 billion, versus the prior year period that saw income at $7.16 billion or $2.10 per share on revenue of $117 billion. Estimates had Shell’s earnings at $1.70 per share.

The results surely would have been worse were it not for a 22 percent increase in US natural gas prices, and increased overall production from the company itself. Shell also had some help from better performance from its own chemicals segment, but ultimately struggled with its crude output, as well as higher production costs for that crude.

Investors were not as forgiving with the company as its American counterperat however, down 4.35 percent ahead of today’s closing bell to $66.75.


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