Business
ExxonMobil and Chevron posted their lowest Q2 profit in the current decade on Friday. Earnings at U.S. oil majors Exxon, which were the worst in a decade, and Chevron missed analysts' expectations, adding to concerns that perhaps executives had not acted quickly enough to mitigate the impact of an over-50-percent drop in oil prices since last summer, reports Reuters. The results highlight how smaller and more nimble U.S. shale oil companies have slashed costs faster and more aggressively than global majors. Some shale producers have cut back drilling by 60 percent or more.
Evan Calio, an analyst with Morgan Stanley, said on Exxon's earnings conference call that the oil giant appeared to be less vocal than its peers about cutting costs. Jeff Woodbury, Exxon's head of investor relations, responded that the company was constantly focused on capital efficiency and cost management. Still, Exxon is sticking for now with its plans to spend $34 billion this year, although that figure has a downward bias because of cost savings and efficiencies, Woodbury said. Chevron also still plans to spend $35 billion this year, but said it would spend less in 2016 and 2017 as several mega projects come online.
Exxon's profit fell by more than half, with the biggest drop in its exploration and production business, where earnings slumped by nearly $6 billion. Chevron's profit plunged 90 percent, a starker drop and one exacerbated by a $2.22 billion loss in its exploration and production division.
The results of the companies, and those of almost the entire oil patch this week, were disappointing but not all that surprising since the price of oil is now half what it was a year ago, notes the New York Times. With most benchmarks hovering around $50 a barrel at the height of the driving season, many analysts say the price will go down further before it rises again.
Oil prices are under pressure, driven by a glut of oil in the United States and on world markets because of resilient domestic production and increased production by Saudi Arabia and other Persian Gulf states. The recent nuclear deal with Iran may eventually add as much as a million barrels a day to the global market of 94 million barrels, further dousing speculation that prices will rebound soon.
