Exxon Warns Production, Refining Losses to Hurt Earnings

By Rebecca Elliott 

Exxon Mobil Corp. warned Thursday of steep losses in its refining and oil-and-gas production businesses during the second quarter, signaling that the company is likely to report a second straight quarterly loss later this month.

Exxon said in a regulatory filing that lower oil and gas prices are poised to drag down its production profits by an estimated $2.5 billion to $3.1 billion compared with the first quarter, when that unit of the company reported $536 million in profits.

Exxon expects that tighter margins on turning oil into fuels such as gasoline and diesel and higher costs associated with moving crude around North America will reduce refining profits by some $800 million to $1.2 billion from the prior quarter. The company posted a $611 million first-quarter loss in its refining business.

Oil-and-gas companies are feeling continuing pressure as the coronavirus pandemic leads millions of people to avoid flying and driving, crimping world-wide demand for fossil fuels.

Analysts have said they expect Exxon to report a loss of about $2.3 billion during the second quarter, according to FactSet. It is set to disclose earnings July 31.

Exxon posted a $610 million loss during the first quarter, its first in three decades.

The company's shares were up nearly 2% in Thursday morning trading.

Second-quarter earnings are likely to be brutal across the U.S. oil patch because global oil demand fell by some 18% during the period, according to the International Energy Agency, as people around the world stayed home to keep the new coronavirus from spreading. Oil and gas prices plunged along with consumption.

U.S. benchmark oil prices averaged about $29 a barrel during the second quarter, compared with around $46 a barrel during the first quarter, according to FactSet. Demand was so low and storage so full in April that prices briefly fell below zero for the first time on record.

Benchmark natural gas prices averaged about $1.77 per million British thermal units during the second quarter, compared with around $1.87 during the first quarter, FactSet data show.

Exxon said earlier this year that it planned to cut 2020 capital spending by $10 billion, or 30%, and planned to trim second-quarter production by some 400,000 barrels a day.

Write to Rebecca Elliott at [e-mail]

(END) Dow Jones Newswires

July 02, 2020 11:28 ET (15:28 GMT)

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