Source: AFP
ExxonMobil and Chevron both reported earnings declines on Friday due to lower refining margins and natural gas prices, but ExxonMobil’s big acquisition looks set to close before Chevron.
ExxonMobil, which aimed in the second quarter to complete its $60 billion takeover of U.S. shale company Pioneer Natural Resources, reported a profit of $8.2 billion, down 28 percent from the year-ago period.
Similar results from Chevron showed how the oil industry, while off-peak, remains highly profitable, allowing for billions of dollars in shareholder payouts.
While commodity prices for liquid hydrocarbons rose slightly and ExxonMobil continued to record impressive volumes from Guyana, these gains were more than offset by a 32 percent drop in natural gas prices.
The company’s energy products division also saw a big drop in profits due to weaker refining margins, despite posting record first-quarter refining throughout.
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Revenue fell 4% to $83.1 billion.
In a conference call with analysts, ExxonMobil CEO Darren Woods expressed confidence in closing the Pioneer transaction in the second quarter, describing “constructive” work with U.S. regulators reviewing the deal on competitiveness grounds.
“As we’ve said all along, we’re very confident that there are no antitrust issues,” Woods said.
Speedbump on the Chevron deal
Rival oil giant Chevron reported profit of $5.6 billion, down 16% on revenue of $48.7 billion, down 4%.
The profit drop was due to lower refinery margins and natural gas prices, partially offset by higher production in the United States, Chevron said.
While ExxonMobil’s Pioneer deal appears on the brink of closure, Chevron’s proposed $53 billion takeover of Hess has gained ground following a challenge from ExxonMobil.
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At issue is Hess’s 30 percent stake in the Stabroek Block offshore Guyana, a mammoth oil field that was the driving force behind Chevron’s takeover. The matter became public in late February after Chevron announced the acquisition in October.
ExxonMobil, which owns 45 percent of Stabroek, has argued that the Chevron-Hess transaction ignores a provision in the venture that gives it “preemptive rights” and “reduces an element of value owed to ExxonMobil,” Woods said, adding that the company submitted for arbitration on the matter.
Chevron Chief Executive Mike Wirth told CNBC that an arbitration hearing in the third quarter and a resolution in the fourth quarter “would be appropriate.”
While Chevron is “very confident” in Hess’ position in the arbitration, Wirth said Chevron could walk away from the transaction if Hess’s Guyana arbitration fails.
Both oil giants continued to direct extra cash to shareholders, with ExxonMobil paying out $6.8 billion in dividends and share buybacks during the quarter and Chevron distributing $6.0 billion.
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Shares of ExxonMobil fell 3.8% in morning trading, while Chevron fell 0.7%.
Source: AFP