Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Exxon boosts capital budget but takes $2 billion charge from XTO deal

Published 31/01/2017, 17:26
© Reuters. The logo of Exxon Mobil Corporation is shown on a monitor above the floor of the New York Stock Exchange in New York
CVX
-
XOM
-
HES
-
NG
-

By Ernest Scheyder

HOUSTON (Reuters) - Exxon Mobil Corp (N:XOM) boosted its 2017 capital budget on Tuesday by about 14 percent on a bet that crude prices have stabilized, but posted its lowest quarterly profit since 1999 as it took a $2 billion charge from the purchase of natural gas producer XTO Energy.

The world's largest publicly traded oil producer wrote down more than $2 billion from its 2009 buyout of natural gas (NGc1) producer XTO Energy, a deal worth roughly $30 billion at the time. The writedown is a tacit acknowledgement from Exxon that natural gas prices are not likely to rise substantially in the near future.

The boost in capital expenditures and the writedown reflect a delicate balancing act by oil and natural gas companies in an era of extreme volatility after a two-year price rout.

Wall Street traders expect oil prices to stay near their current range, between $54 and $55 per barrel, for several years and for natural gas prices to remain near their current level, about $3.13 per million cubic feet.

Exxon said it will increase spending to about $22 billion this year from $19.3 billion in 2016. The move came after peers Chevron Corp (N:CVX), Hess Corp (N:HES) and other oil producers boosted their capital budgets for the year.

The higher spending is not due to rising prices for oilfield contract work or other services, Jeff Woodbury, Exxon's vice president of investor relations, said on an earnings conference call with investors.

"It is, by an large, a function of activity level" increasing, Woodbury said.

Exxon's announcement came after the company posted a better-than-expected quarterly profit, helped by rising oil prices and lower costs.

The results reflected the slow and steady improvement in the global oil and gas industry as commodity prices inch higher after a two-year rout.

The quarterly report was Exxon's first under Chief Executive Officer Darren Woods. Rex Tillerson, the former CEO, has been nominated by U.S. President Donald Trump to be secretary of state and is awaiting confirmation.

Fourth-quarter earnings fell to $1.68 billion, or 41 cents per share, from $2.78 billion, or 67 cents per share, in the year-ago period.

Excluding the $2 billion writedown, Exxon earned 90 cents per share. By that measure, analysts expected 70 cents per share, according to Thomson Reuters I/B/E/S.

Production fell 3 percent to 4.1 million barrels of oil equivalent per day.

Earlier this month Exxon said it would pay up to $6.6 billion to double its holdings in the oil-rich Permian Basin of west Texas, the largest oil field in the United States.

© Reuters. The logo of Exxon Mobil Corporation is shown on a monitor above the floor of the New York Stock Exchange in New York

Shares of Texas-based Exxon fell 1 percent to $83.95 in mid-day trading.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.