On Friday, U.S. oil giant Exxon Mobil surpassed Wall Street’s expectations for fourth-quarter profits, driven by increased oil and gas production despite lower prices and weaker refining margins. The company reported earnings of $7.39 billion, or $1.67 per share, exceeding analyst projections of $1.56 per share, according to LSEG data. Exxon’s record-breaking output in the booming Permian Basin, supported by low production costs, contributed to its strong performance. Additionally, its highly profitable projects in Guyana helped sustain robust natural gas production for the quarter.
However, a slowdown in demand for gasoline and diesel as the post-pandemic boom ran its course, along with excess capacity at refineries globally, weighed on the company’s profits from making fuels. Exxon forecasts that this year’s lower crude prices will shave its downstream earnings by about $1.5 billion. The company expects to offset the impact of lower refining margins with gains from some asset sales and a favorable tax outlook.
Exxon’s chemical business also boosted its profits in the third quarter, primarily driven by a lower cost of ethane feedstock and strong realizations on high-value products. It reported a profit of $893 million, excluding identified items, up from $249 million a year earlier. Exxon’s North American operations accounted for nearly half the profit increase, with lower operating expenses, a higher realization on ethane feedstock, and higher high-value products driving profits there.
Investors will watch the company’s upcoming quarterly report for clues on whether its new strategy to focus on low-carbon ventures is working. The company will also be pressured to prove its ability to manage volatile oil prices, a challenge that has plagued many of the industry’s more prominent producers.
In the upstream sector, Exxon is counting on a rise in oil production from its Guyana and Permian Basin assets to help boost its profits as OPEC continues to keep global supply swelled amid soft demand. Its new long-term plan aims to double oil and gas production from the Guyana projects. It will eventually be connected to a pipeline to deliver the associated gas onshore for power generation.
The plan will take several years to complete and is part of a shift away from the big-ticket investments in LNG and carbon capture technology that drove previous earnings gains. Since 2022, Exxon has returned more than $9 billion to shareholders in dividends and buybacks, and investors will be looking for signs that the company can sustain such returns.
