Bloomberg News

Exxon Falls After Lower-Than-Expected Fourth-Quarter Sales

February 07, 2012

(Adds U.S. and Polish shale drilling starting in 13th paragraph.)

Jan. 31 (Bloomberg) -- Exxon Mobil Corp., the world’s largest energy company by market value, declined after fourth- quarter sales fell short of analysts’ estimates and oil production slumped on five continents.

Revenue rose 16 percent to $121.6 billion during the quarter, less than the $124.4 billion average of five analysts’ estimates compiled by Bloomberg. Exxon fell 1.9 percent to $83.90 at 1:42 p.m. in New York after earlier declining as much as 2.4 percent, the biggest intraday drop since Dec. 12.

Oil and natural-gas production declined 8.8 percent during the final three months of 2011 to the equivalent of 4.53 million barrels of crude a day, the Irving, Texas-based company said in an e-mailed statement today. Paul Cheng, a Barclays Capital Plc analyst, had forecast daily output of 4.719 million barrels in a Jan. 27 note to clients.

“It’s a slight negative,” Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis, said today in a telephone interview. “The company continues to be challenged to grow production.”

Net income increased to $9.4 billion, or $1.97 a share, from $9.25 billion, or $1.85, a year earlier, Exxon said. The per-share result matched the average of eight analysts’ estimates compiled by Bloomberg.

Asset sales added $810 million to fourth-quarter results, the company said. Without those proceeds, profit would have declined from a year earlier, Youngberg said.

Africa, Europe

Earnings from Exxon’s refining and marketing unit fell 63 percent to $425 million for the quarter, down from $1.15 billion a year earlier. Chemical profit tumbled 49 percent to $543 million.

Crude output from Exxon’s wells declined 11 percent, shrinking in every region where the company conducts operations except Asia, where production was unchanged, according to today’s statement.

In Africa, oil production declined 24 percent. The company’s European crude output dropped by 23 percent. Combined, the two regions account for about one-third of Exxon’s oil.

Gas production fell 6.7 percent worldwide to 13.7 billion cubic feet a day, the company said.

No XTO Benefit

The production declines indicate Exxon has yet to glean any tangible benefit from its $34.9 billion purchase of XTO Energy in June 2010, Youngberg said. The transaction was the largest of Chairman and Chief Executive Officer Rex Tillerson’s tenure and was intended to harness the Fort Worth, Texas-based gas prospector’s expertise in penetrating gas- and oil-soaked shale rock.

“Production continues to decline and it just shows that the XTO deal is still not providing any growth,” Youngberg said.

Unlike rivals such as Chesapeake Energy Corp. and ConocoPhillips, Exxon, the largest U.S. gas producer, isn’t cutting back on gas production in response to tumbling prices, David Rosenthal, Exxon’s vice president of investor relations, said today during a conference call with investors and analysts.

Some rigs that had been focusing on finding gas in shale and other unconventional formations have been shifted to prospects laced with so-called natural-gas liquids, such as propane and butane, Rosenthal said. Gas liquids are 10 to 15 times more valuable than the methane alone.

Rich in Liquids

The company is targeting liquids-rich prospects in Oklahoma and West Texas this year, he said. In the Bakken shale formation that lies beneath North Dakota and Montana, Exxon boosted fourth-quarter oil production by 41 percent from a year earlier, Rosenthal said.

Two wells drilled in Poland to test the possibility of harvesting gas from shale in Europe were failures, Rosenthal said. The gas discovered in both wells failed to flow, he said, without providing details.

Shale and similarly dense geologic formations have flooded North America with gas, pushing prices to a decade-low earlier this month, thanks to advances in horizontal drilling and hydraulic fracturing that allowed the formerly impervious rocks to be cracked.

Rosneft Venture

Tillerson plans to spend as much as $37 billion this year to drill for crude, construct gas-export terminals and expand chemical plants. Exxon will present details next month of a $3.2 billion Arctic exploration venture with Russia’s state- controlled OAO Rosneft, according to Eduard Khudainatov, CEO of the Moscow-based oil producer.

Exxon agreed to sell most of its interest in a Japanese refining business to TonenGeneral Sekiyu KK for $3.9 billion, the Tokyo-based company said on Jan. 29. International energy companies including Exxon, Chevron Corp. and ConocoPhillips have been reducing their exposure to refined fuels as slipping demand in some of the world’s largest economies curbed profits.

--With assistance from Susan Warren and Mike Lee in Dallas, Paul Burkhardt and Jim Polson in New York and David Wethe in Houston. Editors: Susan Warren, Jasmina Kelemen

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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