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Exxon Mobil Corp. and Chevron Corp., the two biggest U.S. oil explorers, both missed Wall Street’s profit and production estimates, spurring a stock selloff for both as wary investors hit the lifeboats.
Exxon fell 15 cents short of fourth-quarter earnings estimates by analysts, while Chevron was 55 cents shy. While both have moved to boost growth with a series of discoveries announced in the last year, the latest results show the effort hasn’t yet kicked in.
The production misses by the two U.S.-based drillers reflect their dependence on output from outside the country, which lagged during the final three months of 2017. Both companies are now pushing to overcome that gap with an aggressive push into America’s fertile shale plays and, in Exxon’s case, into Latin America. With oil prices rallying, investors were unimpressed.
“One word: disappointing,” is how Brian Youngberg, a St. Louis-based analyst at Edward Jones & co., described the results. “Chevron was close on production but Exxon was a significant miss,” he said. “The company continues to be challenged on that side.”
Exxon slid 4.5 percent to $85.09 in New York trading at 9:31 a.m., the biggest intraday drop since July 2016. Chevron was down 2 percent. The declines come as prices for crude in New York have rallied by more than 50 percent since June.
While Exxon has long held that choosing to produce lower-cost oil is more important than the volume of output, the latter remains a key metric for investors, according to Cowen & Co. While investors throughout the industry have been pushing for higher shareholder returns, Exxon said it doesn’t yet plan to resume a share buyback program.
Meanwhile, Chevron’s production of oil and gas equated to 2.74 million barrels, less than the 2.802 million analysts expected. The San Ramon, California-based company said it found enough untapped fields to replace 155 percent of the crude and gas it pumped last year, the highest reserves replacement since 2011.
Exxon’s per-share net income, excluding a one-time gain from U.S. tax code changes, was 88 cents, well short of the $1.03 average of 20 estimates from analysts in a Bloomberg survey. Chevron’s per-share earnings, excluding one-time items, amounted to 67 cents, far below the $1.22 average of 19 estimates from analysts in a Bloomberg survey.
The fourth-quarter results hit as both Exxon Chief Executive Officer Darren Woods and Chevron’s CEO Mike Wirth, who stepped into the role on Thursday after being named CEO-in-waiting in September, are gearing up for significant production growth over the next three years.
In Chevron’s case, the company this year is expected to start reaping the rewards after years of investment into expensive mega projects from Australia to Kazakhstan. Exxon’s Woods, meanwhile, last week said that company has signed off on $10 billion of acquisitions in the U.S., Brazil and Mozambique, and is forging ahead with a major exploration venture in Guyana, off the coast of South America.
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