Exxon's First Quarter Profits Down 40%
Exxon was hit and hit hard during the first quarter, posting a
40% drop in profits, the company announced yesterday. Earnings
dropped to $1.02 billion from $1.82 billion in 1Q98. Revenue fell
to $26.884 billion from $29.964 billion in 1Q98. The results from
the first three months of 1999 also included a $120 million charge
for restructuring Japanese operations.
"It was poor, but everybody expected that," said Katie Warne, an
analyst with Edward Jones. "So, in that sense, the company didn't
go very far beyond expectations. The one area that performed worse
than I expected was the U.S. marketing and refining operations. I
thought that division would have broken even but it lost money
instead." The U.S. marketing and refining division lost $28 million
in 1Q99 compared to a profit of $100 million in 1Q98.
Low commodity prices cut Exxon's total petroleum and gas
earnings to $687 million, which is less than half of 1998's first
quarter results of $1.5 billion. The exploration and production
unit experienced losses of $258 million from its 1Q98 result of
$683 million. Worldwide oil production was down 3.6% to 1,564
thousand b/d and worldwide gas production was up 4.5% to 7.5 Bcf/d.
U.S. gas production was flat at 2.1 Bcf/d.
Ironically, Warne said the recent upturn in gas and oil prices
negatively affected Exxon's earnings. "There is a transitory effect
when there is a rapid change in commodities prices. Once oil and
gas prices started turning around, the derivative products
divisions couldn't adjust quickly enough. It put a tighter squeeze
on the margins."
Expectations are just as low for the other major producers. "As
sad as it seems, I think Exxon will be near the top of the list
earnings-wise," Warne said. "This was just a terrible earnings
quarter and Exxon is big enough to weather it while some others
might get hurt more."
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