(Reuters) - Weak refining margins dinged first-quarter results for Exxon Mobil Corp (N:XOM) and Chevron Corp (N:CVX), though Chevron's oil production outshone its larger rival, which has struggled to turn operations around after recent missteps.
For the second consecutive quarter, refining and chemical operations hurt two of the world's largest integrated energy companies and highlighted concerns about how oscillating oil prices and mismatched supply and demand would affect the industry moving forward.
"International market conditions appear to be challenging for most everyone it seems like in the refining sector," said Brian Youngberg, an oil industry analyst at Edward Jones.
"Demand growth is in Asia and a lot of refining capacity is in Europe and the United States."
Strength in the Chevron division that pumps oil and gas helped overcome the refining weakness and beat Wall Street profit expectations for the quarter. Exxon, though, has struggled in recent quarters in its upstream division, and its results badly lagged expectations. Both reported results on Friday.
Shares of Exxon fell 3.4 percent to $78.11 (56.7 pounds) while Chevron rose 0.6 percent to $124.99.
Oil prices (CLc1) (LCoc1) rose in the first quarter but bounced up and down during the period, zapping profit for the downstream divisions. Rising oil prices typically harm refiners by squeezing their margins.
In Exxon's downstream refining unit, profit fell 12 percent, and in the chemical unit, earnings dropped 14 percent.
Profit in Chevron's refining and chemical operations dropped 21 percent to $728 million.
Both companies have been trying different ways to bolster refining operations. Reuters reported earlier this month that they have asked U.S. regulators for exemptions to U.S. biofuels rules that are typically only given to small companies in financial distress.
CHEVRON SHINES UPSTREAM
While Exxon's overall results missed estimates, Chevron easily beat targets set by analysts, largely due to the fruits of its years-long push to bolster oil and gas production operations, especially in liquefied natural gas (LNG) and U.S. shale.
It was a market turnaround for Chevron, which last quarter posted dismal results alongside Exxon.
"While the fourth quarter was a disaster for both, Chevron got back on track. Exxon's still trying to get back on the road," said Youngberg. Exxon has struggled in the past 16 months to unwind some of the biggest bets taken by its former chief executive officer, Rex Tillerson, who left to become U.S. secretary of state in early 2017 before being fired by President Donald Trump last month.