(Bloomberg) — Exxon Mobil Corp. and Chevron Corp. fell after a disappointing first quarter performance, despite posting strong production gains at key oil projects in Guyana and the Permian Basin.
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Exxon fell as much as 3.5% and Chevron fell 0.7% on Friday, even as crude oil prices rose. Exxon posted adjusted earnings per share that were 13 cents below the Bloomberg consensus due to higher refinery maintenance costs and a range of accounting charges. Chevron, meanwhile, made higher-than-expected capital expenditures, causing free cash flow to exceed expectations by $900 million.
The results come amid a shift in investor sentiment favoring oil production growth to take advantage of concerns about global supplies that have supported crude prices.
A bright spot for Exxon was cash flow from operations of $14.7 billion, which came in $1 billion higher than expected, boosted by a substantial increase in Guyanese crude production.
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“Every quarter we're going to have some non-cash expenses, just some more unusual expenses that kind of ebb and flow,” Chief Financial Officer Kathy Mikells said in an interview. “This quarter we had a number of small ones that added up to more importance and that is difficult for analysts to model.”
Exxon started production late last year at Payara, its third Guyanese development project, ahead of schedule, adding 220,000 barrels of daily supplies that will generate profits even if crude falls to the $35 mark.
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“We continue to bring projects in faster and stay on budget, so we have just had great execution in Guyana,” Mikells said, noting that gross daily production is now over 600,000 barrels, compared to 440,000 in the last three months of 2023.
Exxon's performance in Guyana underlines why archrival Chevron wants to get into the project through a $53 billion acquisition of Hess Corp., which has a 30% stake. Exxon claims it has a right of first refusal on Hess' shares, while Chevron says this does not apply because the deal is a corporate merger.
The arbitration process is still in “very early days,” Mikells said. Each side has chosen one arbitrator who will sit on a panel of three, she said. Hess this week extended the closing date of the deal with Chevron by six months to October.
According to Biraj Borkhataira of RBC Capital Markets, a heavy maintenance schedule for the refineries has contributed to missing profits. Exxon's accounting charges were non-cash items related to tax and inventory balance adjustments, Mikells said.
Exxon “has delivered a strong performance in recent months and we believe investors were constructive on the name heading into results, especially as other leveraged downstream names reported results above expectations,” Borkhataira said. “We believe today's results can be viewed as negative as both earnings and underlying cash flow are below expectations.”
As for Chevron, first-quarter adjusted earnings of $2.93 per share were 3 cents higher than the average of analyst estimates in the Bloomberg Consensus. Crude oil production of nearly 2 million barrels per day exceeded expectations.
Chevron's production in the Permian Basin during the period was 859,000 barrels per day, compared to 867,000 in the last three months of 2023.
Chief Executive Officer Mike Wirth had warned that production would temporarily slump before recovering in the second half of the year.
–With assistance from David Wethe, Mitchell Ferman, and Ruth Liao.
(Updates price developments in second paragraph.)
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