Oil Giant Exxon Mobil Faces Refining Profit Slump
Exxon Mobil, the largest oil producer in the United States, saw its shares plummet nearly 2% in early trading on Wednesday as it warned of a decline in refining profits for the fourth quarter. This earnings update signals a challenging environment for oil companies, which are struggling to cope with pricing pressure and demand volatility.
Refining Margins Under Pressure
The industry bellwether expects its fourth-quarter earnings to take a hit of around $1.75 billion compared to the previous quarter. This decline is largely attributed to reduced profitability from refining crude oil and selling petroleum products, a trend that has been prevalent throughout last year. The opening of new plants worldwide has also put a damper on refining margins growth.
Industry-Wide Profitability Concerns
Exxon Mobil is not alone in its struggles. In the third quarter, its profits fell 5% compared to the same period last year, while Chevron’s profits tumbled a staggering 21%. According to Biraj Borkhataria, an oil analyst with RBC Capital Markets, Exxon’s earnings update is consistent with revisions seen for independent refiners and other majors with heavy refining exposure.
Short-Term Impact on Shares
The earnings snapshot is likely to be viewed as a negative and weigh on Exxon Mobil’s shares in the near term, Borkhataria added. The company’s shares have already underperformed the S&P 500 this year, rising 7.6% compared to the index’s 23.3% gain.
Key Metrics
Exxon Mobil is one of the world’s largest refiners, with a total global refining capacity of 4.5 million barrels of oil per day. It is also a major manufacturer of commodity and specialty chemicals. Analysts expect the company to deliver a profit of $1.76 per share in the fourth quarter, down from $2.48 per share a year earlier. Exxon Mobil’s price-to-earnings (PE) ratio stands at 13.56, making it a relatively more attractive investment opportunity compared to Chevron’s 16.43.
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