U.S. stocks fluctuated, as disappointing results from Exxon Mobil Corp. and Chevron Corp. offset speculation that slow wage growth will temper Federal Reserve plans for higher interest rates.
Exxon reported its lowest profit since 2009 as crude prices fell twice as fast as the world’s largest crude producer by market value could slash expenses.
Until this year, Exxon and Chevron typically made the vast majority of their profits from oil and gas production. This week the company said it would cut 1,500 jobs as part of an effort to reduce costs by $1 billion.
Exxon Mobil Corporation (NYSE:XOM) fell -3.77% on trading of 9.65 million shares as opposed to its average trading volume of 12.06 million. Through its XTO Energy affiliate, Exxon operates in all of the major oil and gas plays. While government officials try to soothe investors’ fears with a lot of “happy talk”, new indicators suggest the U.S. economy may be on the verge of collapse. “I think in general the industry is putting a sharper pencil to cost cutting”, said Brian Youngberg, senior oil company analyst at Edward Jones in St Louis.
When crude oil prices were averaging over $100.00 per barrel in 2014, Exxon’s annual dividend stood at $2.76 per share. This year, it earned less than half that amount – $4.2 billion. The latest results that came out Friday were even worse than expected.
Net income was down to over $4.19 billion equal to $1 per share from last year’s $8.78 billion equal to $2.05 per share during the same period.
By that measure, analysts expected earnings of $1.16 per share.
Refining units tend to be far more profitable when oil prices are low, providing Chevron and other integrated energy companies with an internal hedge during times when core operations, such as oil production, are weighed down by weak prices. Global crude prices fell 42 percent from the previous year to average $63.50 a barrel.
In all, Chevron reported earnings of $US571 million, or 30 US cents a share, down from $US5.67 billion, or $US2.98 a share, a year earlier.
CURRENCIES: The dollar fell 0.3 per cent to 123.92 yen and the euro rose 1 per cent to $1.1030.
The companies are in some ways victims of their own success. “The market still looks very oversupplied with oil and we’re in peak demand season”.
Chinese stocks posted their worst monthly loss in almost six years after the Shanghai Composite index tumbled 13.4 percent for the month as investor confidence in a government-led recovery wavered.
Tillerson, a lifer with Exxon, is in his 10 year as the CEO had has been negative about the prospects for an imminent rebound in the oil market. On April 21, he told a Houston energy conference that the supply glut and low prices will persist “for the next couple of years” at least. It hasn’t been enough, though, as profits fell through the floor. But Exxon Mobil and Chevron are still pressing ahead in promising oil and gas fields in several countries, including the United States and Australia. “A rising tide lifts all ships, but when the tide goes down, all ships go down”.