Exxon Mobil reported a 21% decline in quarterly profit on Friday as its natural-gas operations were hit by lower prices due to global oversupply.
Second-quarter earnings fell by $820 million to $3.13 billion, or 73 cents per share. Analysts had expected earnings of 66 cents per share but Exxon would have missed estimates without a one-time tax benefit of about $500 million.
It was the third quarter in a row that Exxon has posted weaker year-over-year results, with the chemicals business falling to a loss in the U.S. for the first time in at least three years and lower margins and downtime driving refining profits down 88%.
Profits from the natural-gas segment fell by about half to $1.34 billion, reflecting lower prices due to the abundant new supply from projects around the world.
Exxon Mobil, one of the largest natural-gas producers in the U.S., had warned on July 1 that second-quarter profits would fall by as much as $600 million due to price declines. In trading Friday, its stock was down 1.5% at $71.41.
“They missed already lowered expectations across all segments,” said Jennifer Rowland, an analyst at Edward Jones.
As The Wall Street Journal reports, “The world’s largest oil companies are feeling the financial pressure of a global decline in natural-gas prices.” The spot U.S. benchmark price for natural gas fell by about 10% in the three months ended in June and has continued to fall through July even though a U.S. heat wave led to a surge in demand at power plants.
“In some regions, such as in West Texas, natural gas has even sold for a negative value, meaning producers had to pay pipeline companies to process and ship the commodity,” the WSJ noted.
Production has been booming in the Permian Basin and new export projects ranging from the Texas Gulf Coast to Papua New Guinea have added to the oversupply.
Exxon said its crude oil production rose about 7% in the second quarter but oil prices have been volatile due to demand and geopolitical worries. The U.S. benchmark for crude fell 7.9% to $53.95 a barrel Thursday.