Weak oil prices <CLc1> shriveled quarterly profit at Exxon Mobil Corp <XOM.N> and Chevron Corp <CVX.N>, compelling both companies to rethink operations and plan for what many expect to be a sustained period of cheap crude.
Earnings at Exxon and Chevron, two of the world’s largest oil producers, also 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.
The results also highlighted how smaller and more nimble U.S. shale oil companies had slashed costs faster and more aggressively than global majors. Some shale producers have cut back drilling by 60 percent or more.
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.
Though production grew at both companies, they missed the estimates of many analysts who had expected the energy giants to pump more.
Shares of both fell about 4.6 percent in morning trading.
Still, the two companies benefited from their refining divisions, which make gasoline and other fuels.
Refining units tend to be far more profitable when oil prices are low, providing Chevron and other integrated energy companies with an internal hedge during times when core operations, such as oil production, are weighed down by weak prices.
Both companies stressed their ability to weather the price doldrums and emerge stronger.
Chevron’s Chief Executive John Watson, for instance, bluntly described the results as “weak.” He laid off 2 percent of its staff earlier this week.
“I think in general the industry is putting a sharper pencil to cost cutting,” said Brian Youngberg, senior oil company analyst at Edward Jones in St Louis. “I think they are realizing the days of $100 a barrel (oil) are over.”
Youngberg added that Exxon’s U.S. operations were particularly weak, but that it was good to see the company was finally improving its oil and gas production.
(Reporting by Ernest Scheyder in Williston, N.D., and Anna Driver in Houston; Editing by Terry Wade and Bernadette Baum)
This article was written by Ernest Scheyder and Anna Driver from Reuters and was legally licensed through the NewsCred publisher network.