IRVING, Texas -- Exxon Mobil Corp. has reported a 58 percent drop in first-quarter profits as the recession cut into crude and natural gas prices and drove its global refining business to a loss, says Reuters.
ExxonMobil said net income fell to $2.09 billion, or 30 cents a diluted share, from record first-quarter income of $5 billion, or 71 cents a diluted share, a year earlier. Revenue slumped 24 percent to about $43.53 billion. The results fell short of analysts’ expectations and marked the third straight quarter ExxonMobil’s earnings have dropped after years of blockbuster profits.
Downstream, ExxonMobil’s refining and marketing business was affected by slow heating oil sales during the warm winter. Sales of jet fuel were also depressed by the slowdown in travel after the September 11 attacks, Reuters says. The company said its worldwide refining and marketing business posted a loss $28 million compared with profits of $999 million a year ago.
“It was clearly an environment of weak demand and poor trading conditions in the downstream,” Banc of America oil major analyst Tyler Dann told the news agency. “I’ve never seen them make a loss in the downstream. It was frightfully bad.” He expected the second quarter would see improvement. “It is what it is, but let’s not be too eager to dance on the grave here.”
Like the rest of the industry, Exxon Mobil suffered from an economic recession that has taken a heavy toll on petroleum demand. The unusually mild winter, which cut demand for home heating fuels, made business even tougher in the first three months of this year.
U.S. crude prices averaged less than $22 a barrel during the period, a 25-percent drop from the first quarter a year earlier. Gasoline prices fell about 60 percent from a year ago.
Industry analysts forecast improvement in the second quarter as oil companies begin to benefit from a surge in crude prices in March and April after tensions in the Middle East and a short-lived coup in Venezuela raised fears of a supply crunch.
Crude for May delivery on the New York Mercantile Exchange settled at $26.27 a barrel on Monday. The crude rally lifted the company’s stock, leaving it up nearly 10 percent in the first quarter.
Excluding special items, Exxon Mobil earned 31 cents a share in the first quarter, missing expectations of Wall Street analysts who said the company would be hurt by the low commodity prices earlier in the period and poor returns from its refining and marketing business. Oil analysts had forecast the company report a profit of 32 cents a share to 45 cents a share, with an average estimate of 39 cents a share, according to research firm Thomson Financial/First Call.
“The reduction in earnings reflected weakened conditions in all business segments, including lower crude oil prices, a sharp decline in natural gas realizations and significantly weaker refining and marketing margins,” ExxonMobil Chairman and CEO Lee Raymond said in a statement. He added, however, that industry conditions have improved in both exploration and production and refining and marketing so far in the second quarter.
Separately, Houston-based Marathon Oil Corp. has reported first-quarter 2002 net income, adjusted for special items, of $27 million or 9 cents per diluted share, compared to net income, adjusted for special items including losses related to the separation of United States Steel Corp., of $473 million, or $1.53 per diluted share, in first-quarter 2001.
“Marathon’s first-quarter 2002 results were lower than the same period last year due to extremely tight refining and marketing margins caused by refined product prices failing to keep pace with increasing crude oil costs during the quarter,” said President and CEO Clarence P. Cazalot Jr. Also, “the narrowing of the price differential between sweet and sour crude oil during the first quarter adversely effected refining and wholesale marketing profitability when compared to the same period last year. Earnings were also negatively impacted by lower natural gas and liquid hydrocarbon prices, as well as lower liquid volumes.”
Marathon’s first-quarter oil and gas production averaged 424,000 barrels of oil equivalent per day (boepd), in line with expectations and on track to achieve its 2002 production target of approximately 430,000 boepd.
Downstream, Marathon Ashland Petroleum LLC’s (MAP) recently completed coking unit at the company’s Garyville, La., refinery helped offset high crude oil costs during the first quarter through the refinery’s ability to process lower-priced sour crude. MAP and its partners in the Centennial Pipeline commissioned this new interstate pipeline during the first quarter and made first product deliveries in early April, providing finished products to the Midwest from U.S. Gulf Coast refineries.
Income for Marathon’s reportable segments was $139 million in first-quarter 2002, compared with $884 million in first-quarter 2001.
Worldwide exploration and production segment income totaled $165 million in first-quarter 2002, compared to $600 million in first-quarter 2001. U.S. upstream income was $82 million in first-quarter 2002, compared to $442 million in first-quarter 2001.
International upstream income was $83 million in first-quarter 2002, compared to $158 million in first-quarter 2001.
The refining, marketing and transportation segment loss was $51 million in first-quarter 2002, versus segment income of $276 million in first-quarter 2001. This was the first quarterly loss for the downstream segment since formation of MAP in January 1998. The decrease primarily reflects lower refining and wholesale marketing gross margins. The refining and wholesale margins were severely compressed as crude oil costs increased more quickly than refined product prices during the quarter. A narrowing of the price differential between sweet and sour crude oil in the first-quarter 2002 also negatively impacted refining and wholesale marketing gross margins.
