Exxon Mobil has reported significant declines in their second-quarter profits in the wake of the sharp drop in energy prices and lower fuel margins. The reduced profits come as a stark contrast to the substantial gains recorded in the same period last year when oil and gas prices skyrocketed due to Russia’s invasion of Ukraine.
Exxon Mobil reported a staggering 56 percent slump in its second-quarter profit. Meanwhile, other oil giants like Chevron, Shell, and TotalEnergies also faced profit declines of 48 percent, 56 percent, and 49 percent, respectively. Chevron’s net income dropped to $7.88 billion, or 1.94 cents per share, compared to a record $17.85 billion in the previous year.
However, when excluding last year’s extraordinary second-quarter performance, Exxon Mobil managed to achieve its strongest results for the April to June period in over a decade. The positive outcome was attributed to cost-cutting measures and the divestment of less profitable assets, as highlighted by Exxon’s Chief Financial Officer, Kathryn Mikells.
The decline in earnings was primarily influenced by the drop in benchmark Brent crude prices, which averaged $80 a barrel compared to $110 a year earlier. Additionally, liquefied natural gas (LNG) prices fell significantly, reaching $11.75 per million British thermal units (mmBtu) from approximately $33 previously.
Exxon pointed out that lower natural gas prices and weaker refining margins in the industry adversely affected earnings. Energy Products’ earnings amounted to $2.3 billion, down $1.9 billion from the first quarter, largely due to easing Russian supply concerns impacting diesel margins. However, Chemical Products’ earnings saw an increase to $828 million from $371 million in the first quarter, benefiting from lower feed costs.
Despite the challenging market conditions, Exxon managed to maintain its oil production at 3.7 million barrels of oil equivalent per day (boed) year-to-date, in line with the company’s annual target. Contributing to this performance was improved output in the U.S. Permian basin, which delivered 622,000 boed in the quarter, and in Guyana, where Exxon plans to boost production by 5 percent to 400,000 boed by year-end.
Throughout the second quarter, the company invested $6.2 billion in capital and exploration spending, totaling $12.5 billion for the first half of 2023. This spending aligns with Exxon’s full-year guidance of $23 billion to $25 billion. Furthermore, the company achieved cumulative structural cost savings of $8.3 billion from 2019 levels, nearing its $9 billion target.
In its commitment to the energy transition, Exxon recently announced the acquisition of gas pipeline company Denbury for $4.9 billion, with a focus on accelerating carbon capture and storage (CCS) operations.
Despite the challenging financial landscape, Exxon Mobil distributed about $8 billion in cash to shareholders in the second quarter, including approximately $3.7 billion in dividends. This move demonstrates the company’s commitment to returning value to its investors during these trying times for the energy sector.