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 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.
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.
CUTS AT EUROPEAN RIVALS
Exxon and Chevron's European peers such as Royal Dutch Shell Plc
have taken more aggressive action. BP Plc cut its budget for the
second time this year, while Shell said it would lay off 6,500
workers.
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.
Pat Yarrington, Chevron's chief financial officer, seeking to head
off complaints about cost management, said the company had slashed
about $3 billion in spending so far this year, and wasn't done.
Still, analysts peppered her throughout the earnings call for
details.
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 slumped more than 3 percent in afternoon trading.
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BRIGHT SPOT
To be sure, 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."
Exxon also said Friday it would slow its share repurchase program.
The company purchased $1 billion of its own stock in the second
quarter, but expects to spend roughly half of that on repurchases in
the third quarter.
Chevron earlier this year scrapped its entire repurchase program.
(Reporting by Ernest Scheyder in Williston, N.D., and Anna Driver in
Houston; Editing by Terry Wade and Bernadette Baum)
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