NEW YORK: ExxonMobil reported a nearly five-fold increase in quarterly earnings Friday due to the impact of the US tax reform, but the company’s share price fell sharply due to disappointing operational results.
Net income was $8.4 billion, up nearly 400 percent from the year-ago result, boosted by a one-time $5.9 billion gain from the revaluation of deferred taxes following US tax reform. Higher oil prices also lifted results.
Revenues rose nearly 18 percent to $66.5 billion.
However, oil and gas production fell three percent or 130,000 barrels per day.
And despite the big increase in profits, ExxonMobil’s earnings per share excluding the one-time impact of the tax reform translated to 88 cents, below the $1.04 expected by financial analysts.
Analysts hit out at ExxonMobil over the weak oil and gas production output, as well as underperformance in downstream and chemicals businesses.
The results “were weak across the board, with misses in every segment,” said a note from JPMorgan Chase said in a note, which also pointed out that the company did not announce any new share repurchases as some had expected.
Shares of ExxonMobil slumped 5.3 percent to $84.32 in morning trading, making it the biggest loser in the Dow.
Chevron profits surge
Chevron, the second-biggest US oil company after ExxonMobil, also reported a jump in fourth-quarter earnings courtesy of tax reform and higher oil prices.
Profits came in at $3.1 billion, up from just $415 million in the same period of the prior year. The results included a non-cash benefit of $2 billion due to the tax reform.
The company, which cut back capital spending and laid off some staff during a two-year industry downturn due to low oil prices, announced it was boosting its quarterly dividend by four cents to $1.12 per share.
“We achieved our objective of being cash flow positive through deliberate actions to reduce capital expenditures, lower our cost structure, start and ramp-up projects, and conclude planned asset sales. Higher commodity prices helped as well,” said Chevron chief executive Michael Wirth.
“These improvements give us the confidence to increase the dividend.”
Nevertheless, Chevron shares fell 4.0 percent to $120.59.
After about two years under pressure, oil prices have stabilized and are now trading well above $60 a barrel.
Oil services companies that depend on capital budgets from ExxonMobil, Chevron and other oil giants signaled greater optimism during their earnings reports this week.
“2017 was a dynamic year for the oil and gas sector that marked another step on the road to recovery for our industry,” said Halliburton chief executive Jeff Miller after the company reported results late last month.
“I am optimistic about what I see in 2018. Commodity prices are supportive of increasing activity in North America and I am encouraged by the increase in tender activity and the positive discussions we are having with our international customers.