Fri Jul 29, 2016 10:33am EDT
Chevron Corp (CVX.N) posted its worst quarterly loss since 2001 on Friday and Exxon Mobil Corp (XOM.N) reported a 59 percent slide in quarterly profit, both victims of a prolonged rout in crude prices CLc1LCOc1 and sinking income from refining, a sign of the broad malaise across the energy sector.
The weak results from two of the world’s largest oil producers come as the energy industry is at a crossroads, trying to survive in an era of low prices, which many analysts see as the new status quo, while funding expensive growth projects crucial for long-term survival.
“It’s a challenging environment for the integrated” oil producers, said Brian Youngberg, an energy analyst with Edward Jones.
The weak results could force the companies to reconsider their long-held policies of maintaining and growing their quarterly dividends, especially after ConocoPhillips (COP.N), Marathon Oil Corp (MRO.N) and others cut their payouts earlier this year. So far during this two-year long downturn Exxon and Chevron have held up their dividends as sacrosanct.
Exxon, the world’s largest publicly traded oil producer, shocked Wall Street as its quarterly profit missed expectations, sending its shares down as much as 4.5 percent on Friday.
Its profit from producing oil and gas fell about 85 percent to $294 million. In the United States, where Exxon is the largest natural gas producer and a major oil producer, the company lost money.
Chevron, the second-largest U.S.-based oil producer, reported its largest quarterly loss in 15 years, with Chief Executive Officer John Watson acknowledging the company is in the midst of an “ongoing adjustment to a lower oil price world.”
Chevron’s results beat expectations, with analysts confident in the company’s ability to cut costs as it brings several large projects online in the next few years.
After providing bumper profits early in the downturn, refining was the Achilles’ heel for both companies during the quarter. The refining industry has been hammered of late by growing fuel inventories and weak demand, denting its profitability.
Exxon, for instance, processed 4 percent less crude in the quarter than a year ago and produced less gasoline, an unusual step as low oil prices typically encourage refiners to produce more.
Exxon shares dropped 2.4 percent to $88.08 while Chevron fell 1.3 percent to $100.53.
(Editing by Terry Wade and Jeffrey Benkoe)