Exxon Shares Slide on Lower Q2 Profit Outlook

Exxon Mobil Corp’s (XOM) stock fell nearly 4% Thursday after the company warned falling natural gas prices, lower margins, and soft demand could shave billions off its second-quarter earnings.

The Texas-based company said in a regulatory filing Wednesday lower natural gas prices and margins could cut more than $4 billion from its second-quarter earnings compared with the first quarter. Exxon expects weak natural gas prices to cut earnings by $1.8 million-$2.2 billion, while lower margins could reduce earnings by another $2 billion-$2.2 billion.

In its worst-case scenario, market and seasonal factors cause quarterly earnings to fall to $6.2 billion, a nearly 50% drop from $11.6 billion last quarter. Its best-case scenario, in which derivatives contracts and higher margins on chemical products boost earnings as much as $1.2 billion, sees profit dropping to $9.6 billion.

Last year, the company reported record profits as oil supply chains were restricted by Russia’s invasion of Ukraine. The company says its returned close to $30 billion to its shareholders last year, “equally balanced between dividends and share repurchases,” delivering shareholders a purported return on investment of 87%. Nearly $14 billion was dished out in dividends, and the oil giant is on track to buy back $35 billion of its own stock through 2024.

Energy prices have fallen dramatically from their 2022 highs. U.S. natural gas futures were trading at $2.64 per million British thermal units Thursday morning, less than half their 52-week high of nearly $6.

Saudi Arabia, one of the world's largest oil producers and exporters, announced yesterday that it is cutting oil production in August by 1 million barrels a day in an effort to prop up struggling oil prices.