Exxon warns of oil price impact on Q3 earnings

Exxon warned that its third-quarter earnings would likely be hit by lower oil prices, with an impact of between $600 million and $1 billion.

In an SEC filing, the supermajor also estimated the effect of lower refining margins on its third-quarter earnings at up to $1 billion.

International crude oil prices averaged 17 percent lower in the third quarter of the year than in the second, Reuters said in a report on Exxon’s update. The drop followed lower demand for oil from China and elsewhere. However, demand for Exxon’s domestic oil has proven surprisingly resilient, hitting a four-year high this summer, according to the Energy Information Administration.

The update follows a better-than-expected second quarter, when Exxon posted its second-biggest second-quarter earnings in a decade as its acquisition of Pioneer Natural Resources fueled record quarterly production and the highest oil output since the merger of Exxon and Mobil.

The Pioneer deal contributed $500 million to earnings in the first two months after closing, with record production and integration and synergy benefits exceeding expectations, the supermajor said in August.

The transaction gave Exxon access to more than 1.4 million net acres in the Permian’s Delaware and Midland basins.

“We delivered the second-highest second-quarter earnings in a decade as we continue to improve the fundamental strength of the company’s earnings,” commented Chairman and Chief Executive Officer Darren Woods.

However, refining margins were already lower in the second quarter, dampening that segment’s performance even as upstream performance remained robust at $7.1 billion on a total net profit of $9.1 billion.

Exxon noted, however, that the lower margins were a correction from “the historically high levels of the prior year as demand growth was more than met by capacity additions.”

The supermajor reports third-quarter performance numbers on November 1.

By Irina Slav for Oilprice.com

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