(Bloomberg) — Exxon Mobil Corp. and Chevron Corp. declined after disappointing first-quarter performance, despite strong production gains at marquee oil projects in Guyana and the Permian Basin.
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Exxon fell 3.5% and Chevron fell 0.7% on Friday, even as crude prices rose. Exxon reported adjusted earnings per share 13 cents lower than the Bloomberg consensus due to higher costs related to refinery maintenance and a series of accounting charges. Chevron, meanwhile, incurred higher than expected capital expenditures, resulting in lower-than-expected free cash flow of $900 million.
The results come amid a shift in investor sentiment favoring oil production growth to take advantage of global supply concerns that have supported crude prices.
A bright spot for Exxon was operating cash flow of $14.7 billion, $1 billion above forecast, boosted by a substantial increase in Guyanese crude production.
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“In any given quarter, we will have a number of non-cash expenses, just a little more unusual, that kind of ebb and flow,” Chief Financial Officer Kathy Mikells said in an interview. “This quarter we had a number of small issues that added up to become larger and that’s difficult for analysts to model.”
Exxon started production at Payara, its third Guyanese development, ahead of schedule late last year, adding 220,000 barrels of daily supply that generates profits even as crude dips below the $35 mark.
Follow Exxon and Chevron’s first quarter results: TOPLive
“We continue to launch projects faster and under budget, so we have had excellent execution in Guyana,” Mikells said, noting that gross daily production is now above 600,000 barrels, up from 440,000 over the last few years. last three months of 2023.
Exxon’s performance in Guyana highlights why its main rival Chevron wants to enter the project through a $53 billion buyout of Hess Corp., which holds a 30% stake. Exxon says it has a right of first refusal on Hess’ stake, while Chevron says that doesn’t apply because its deal is a merger of companies.
Arbitration proceedings are still “in their early stages,” Mikells said. Each side has chosen an arbitrator who will sit on a panel of three, she said. Hess this week extended the closing date of its deal with Chevron by six months, to October.
A busy refinery maintenance schedule contributed to the profit loss, according to Biraj Borkhataira of RBC Capital Markets. Exxon’s accounting charges were non-cash items associated with tax balance sheet and inventory adjustments, Mikells said.
Exxon “has delivered strong performance in recent months, and we believe investors have been constructive on the name ahead of the results, especially as other downstream leveraged names have reported better-than-expected results” , said Borkhataira. “We believe today’s figure could be considered negative, with underlying earnings and cash flow falling short of expectations.”
As for Chevron, adjusted first-quarter earnings of $2.93 per share were 3 cents above the average Bloomberg consensus analyst estimate. Crude oil production of nearly 2 million barrels per day exceeded forecasts.
Chevron’s production in the Permian Basin was equivalent to 859,000 barrels per day during the period, compared to 867,000 during the last three months of 2023.
Chief executive Mike Wirth had warned that production would dip temporarily before rebounding in the second half.
–With assistance from David Wethe, Mitchell Ferman and Ruth Liao.
(Updates stock price movements in second paragraph.)
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