Refining weakness drags down Exxon, Chevron results; shares plunge

By Ernest Scheyder

HOUSTON (Reuters) – Exxon Mobil Corp (NYSE:) and Chevron Corp (NYSE:) posted rare quarterly earnings misses on Friday as cost cuts and rising oil prices failed to offset weakness in international refining operations, sending shares down in morning trading.

Exxon’s stock dropped 5 percent as weaker than expected results from the world’s largest publicly-traded oil producer contrasted with improvements at European rivals. Chevron’s shares fell about 4 percent. Both companies are part of the , which was down 1 percent.

Even though oil prices jumped 25 percent in 2017 over the prior year, boosting the pair’s U.S. production operations, international refining and chemical profits struggled in the fourth quarter, fueling concerns that a weak spot could be emerging in the industry.

“It was a pair of disappointing results from both companies,” said Brian Youngberg, an oil industry analyst at Edward Jones. “Is refining something to be concerned about as we move through 2018? Will that be an offset to those higher oil prices?”

Both companies recorded gains from recent U.S. tax reform. Non-cash gains were $5.94 billion at Exxon and $2 billion at Chevron.

Excluding that tax change and other one-time items, Exxon earned 88 cents per share. By that measure, analysts expected earnings of $1.04 per share, according to Thomson Reuters I/B/E/S.

The earnings miss fueled more bad news for Exxon, coming as rival Royal Dutch Shell (LON:), the world’s second-largest oil company, overtook Exxon’s annual cash generation for the first time, producing about 6 percent more cash last year than Exxon’s $33.2 billion in 2017.

Exxon’s production fell 3 percent to 4 million barrels of oil equivalent per day, with the only output gains in the company’s portfolio coming from the United States.

At Chevron, production rose, but excluding the tax change and other one-time items, the company earned 72 cents per share. By that measure, analysts expected earnings of $1.22 per share, according to Thomson Reuters I/B/E/S.

France’s Total SA (PA:) and the United Kingdom’s BP (LON:) Plc plan to post quarterly results later this month. BP has vowed to not change its spending plans because of rising global oil prices and only to approve projects that can make money with prices below $40 a barrel.

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