The Ratings Game: Exxon, Chevron profits slide on lower oil prices

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Profit shrunk at Exxon Mobil Corp. and Chevron Corp. as the U.S. integrated oil and gas giants continued to feel the pressure from lower oil and gas prices and, at Chevron, a massive oil field beneath the steppes of Kazakhstan turned out to be costlier to develop than expected.

Chevron CVX, -0.02%  on Friday reported GAAP third-quarter profit of $1.36 a share on sales of $36.12 billion. Analysts polled by FactSet had expected earnings of $1.57 a share on sales of $38.00 billion. Friday’s results compare with GAAP earnings of $2.11 a share on sales of $44 billion in the third quarter of 2018.

Exxon XOM, +2.26%  also earlier Friday reported third-quarter GAAP earnings of 75 cents a share on sales of $65 billion. Analysts surveyed by FactSet expected earnings of 69 cents a share on sales of $61 billion. The results compare with earnings of $1.46 a share on sales of $77 billion in the year-ago period.

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Chevron announced a 25% cost overrun on its Tegiz Expansion project in Kazakhstan, an oil field the company describes as a “supergiant” field with a surface area more than four times the size of Paris. Chevron holds a 50% interest in the field.

“In recent years, project execution has been improving across the industry,” analysts at Citi, led by Alastair Syme, said in a note. A cost overrun “feels like a return to a bygone era.”

Chevron stock turned higher as the trading day progressed, on track for snapping a four-day losing streak. Earlier, the shares were the fifth worst performer on the Dow Jones Industrial Average. DJIA, +0.88% Chevron is holding on to yearly gains of 6.4% so far, compared with an advance of 17% for the Dow in the same period.

Exxon shares, on the other hand, were on pace for their largest one-day percentage increase since Oct. 21, and were among the top 10 performers on the DJIA on Friday. The gains also tipped the scales back to yearly gains, with Exxon stock up 0.7% year-to-date and on track for its best year since 2016.

Exxon and Chevron are Dow components.

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Exxon’s quarterly beat was thanks to better-than-expected results for its refining business. Exxon’s major projects, including offshore blocks in Guyana, were reportedly on track.

Exxon’s refining earnings of $1.23 billion tripled from the second quarter, “mainly due to much-reduced turnaround activity,” analysts at Raymond James said in a note.

Exxon’s oil and gas exploration earnings of $2.2 billion were down 28% quarter-on-quarter on lower Brent crude pricing, while earnings of $241 million from its chemicals business “barely edged up from 2Q’s decade-low level,” the Raymond James analysts, led by Pavel Mochanov, said.

“To underscore, the prolonged weakness in chemicals is a structural headwind that seems unlikely to dissipate anytime soon,” they said. “On a positive note: capital spending seems to have finally peaked, with 3Q’s $7.7 billion down 4% from 2Q; notably, this includes decreases in both U.S. and international upstream spending.”