Exxon Mobil’s first-quarter profit fell by half to $2.35 billion, its worst quarter since late 2016, as the company spent more on oil production and was hit by lower margins in its refinery business.
The results fell short of Wall Street expectations, and the shares fell in afternoon trading Friday.
The refinery side of the business posted a loss of $256 million after earning $940 million a year earlier. The company blamed lower margins due to high gasoline inventories, and an increase in refinery maintenance.
“It was a tough market environment for us this quarter,” Senior Vice President Jack Williams said on a call with analysts. Refining margins were the lowest Exxon has seen in a decade — “historically low levels, and our results were in line with that margin environment,” he said.
Citi analysts said Exxon’s complex refining network was a disadvantage, as was the pace of maintenance activity. The refining and chemicals businesses are lagging the 2019 potential that Exxon laid out just a year ago, they wrote in a note to clients.
Earnings also fell by half in the chemicals business on weaker prices due to an increase in industry capacity.
Exxon’s exploration and production business was less profitable than a year ago both in the U.S. and overseas.
During the quarter, Exxon continued to build its operation in the Permian Basin of west Texas and New Mexico. That helped drive a 42% spike in spending on exploration and production, to $6.89 billion.
Production rose 2% to the equivalent of 4 million barrels of oil a day, with a contribution from higher output in the Permian.
Oil prices increased during the first quarter following an agreement by OPEC and allies including Russia to limit production. More recently, prices also rose after the U.S. announced it will end waivers from sanctions for countries that import oil from Iran, including China, India, Japan and South Korea.
Prices for natural gas, however, were hurt by warmer winter weather.
Exxon’s profit for the first three months of the year worked out to 55 cents per share, well below the 70 cents per share average forecast of analysts polled by FactSet.
Exxon Mobil Corp. does not adjust its reported results based on one-time events such as asset sales, and in last year’s first quarter the company posted a gain from the $744 million sale of its 50% stake in a gas field off the coast of Australia.
Revenue fell to $63.63 billion from $68.21 billion a year, compared with the FactSet estimate of $63 billion.
Shares of the Irving-based oil and natural gas giant were down $2.48, or 3%, to $79.74 in afternoon trading.