Takeaways
- Higher oil prices and better industry margins gave ExxonMobil's third-quarter profits a boost from the previous three months, the company said in an SEC filing.
- Gains in the oil and gas sector have been partially offset by likely declines in the chemicals sector.
- Oil prices have fallen so far in the fourth quarter, which sent ExxonMobil shares lower in recent days.
Rising crude oil prices added as much as $1.3 billion to ExxonMobil's (XOM) third-quarter profits from the previous quarter, while improving margins The industry boosted refining profits by up to $1.1 billion, according to estimates released by the company late Wednesday.
The company also said in a filing with the Securities and Exchange Commission (SEC) that profits from its natural gas production increased by up to $600 million thanks to rising prices during the last period compared to the second quarter. Higher estimates for its oil and gas businesses are partially offset by expected declines in the chemicals and specialty products sectors.
ExxonMobil's guidance provides insight into the impact of rising crude oil and fuel prices on oil companies. ExxonMobil shares gained 15% during the third quarter, in line with gains in other energy majors.
Big oil companies like ExxonMobil make money from both their upstream operations, which involve the extraction and production of crude oil, and their downstream operations, which include refining oil and selling it to consumers at gas stations.
ExxonMobil generates about four-fifths of its revenue from its downstream operations, particularly through its gas stations. Higher prices at the pump, which rose about 30 cents nationally between early July and late September, likely boosted the company's profit margins.
The latest quarter draws parallels with the first half of 2022, when a surge in oil prices sparked by Russia's invasion of Ukraine and a rebound in global demand from pandemic lockdowns sent energy sector profits soaring . ExxonMobil's profits hit a record $55.74 billion last year, more than double from 2021.
Analyst estimates compiled by Visible Alpha Project ExxonMobil will report 9 third quarter earnings, 4 billion dollars, up from $7.9 billion in the previous quarter, but down from $19.7 billion in the year-ago quarter.
While the price surge While oil boosted energy companies' growth, profits and stock prices in the third quarter, the fall in crude prices so far this quarter appears to be taking a toll.
After rising more than 28% in the third quarter, oil prices have retreated from their September highs. The price of WTI crude – the US benchmark – fell more than 5% yesterday after an Energy Information Administration report showed gasoline demand was weaker than expected. That sent ExxonMobil shares down nearly 4%.
The actions of ExxonMobil fell another 2.3% at the close Thursday, as oil prices fell further. XOM shares are up just 2.3% year to date.
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Source: investopedia.com