Exxon Sees $4 Billion Earnings Hit from Gas Prices, Refining

(Bloomberg) — Exxon Mobil Corp. said lower natural gas prices and refining margins will reduce second-quarter earnings by about $4 billion compared with the previous three months.

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Lower earnings in the two divisions are likely to reduce Exxon’s net income to about $7.5 billion, RBC Capital Markets analyst Biraj Borkhataria wrote in a note. That’s well below the current Bloomberg Consensus of about $9.43 billion.

“The update is likely to be viewed negatively for earnings expectations into reporting, and we expect consensus numbers to move lower over the coming days,” Borkhataria said.

The shares dropped 1.3% in after-hours trading to $105.54 as of 5:34 p.m. in New York. Exxon is the first of the five Western oil majors to release earnings guidance for the second quarter, providing a snapshot of the full results that are expected to be released later this month.

Earnings for Big Oil companies are coming down from last year’s record levels as commodities prices ease amid rising global interest rates and China’s sluggish recovery from Covid-related lockdowns. Investors will be studying second-quarter results carefully to see if executives can stick to their pledges to return billions of dollars to shareholders through buybacks and dividends.

Read More: Soaring Interest Rates Are Quietly Transforming the Oil Market

The drop in gas prices hurt profits by about $2 billion, while lower refining margins accounted for about $2.1 billion, Exxon said in a statement Wednesday. The lower earnings were partially offset by a $600 million gain in unsettled derivatives and $300 million in chemicals. Lower oil prices will only reduce earnings by about $100 million, the company said.

RBC said its net-income outlook excluded the movements in unsettled derivatives.

A year ago, Exxon made a record quarterly profit of $18.6 billion, boosted by a spike in energy prices caused by Russia’s war in Ukraine.

(Updates with analyst comment from second paragraph.)