ExxonMobil (XOM) Expects Soft Gas Prices to Hurt Q2 Earnings
Exxon Mobil Corporation XOM recently disclosed in a Form 8-K that soft natural gas prices due to lower demand and excess inventories will sequentially hurt its earnings for the second quarter of 2024.
Owing to changes in prices of the commodity, the leading integrated energy player expects its second-quarter earnings to decline sequentially by $300 million to $700 million. However, XOM projects that a favorable crude pricing scenario in the June quarter will completely offset this negative impact.
ExxonMobil added that unfavorable changes in industry margins will affect its earnings from refining activities by $1.1 billion to $1.5 billion. These estimates exclude the impact of the acquisition of Pioneer Natural Resources, which was closed on May 3 and strengthened the company’s footprint in the Permian Basin, the most prolific basin in the United States.
The additional impact from the Pioneer Natural acquisition is expected to result in the production of 500-550 thousand barrels of oil equivalent per day. This acquisition is likely to have affected XOM’s earnings from May 3 to Jun 30 in the second quarter.
The Zacks Consensus Estimate for XOM’s earnings per share in the second quarter is pegged at $2.34. ExxonMobil, currently, carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked energy companies include Matador Resources Company MTDR, Chevron Corporation CVX and SM Energy Company SM. While SM Energy sports a Zacks Rank #1 (Strong Buy), Matador Resources and Chevron carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Matador Resources recently entered into a $1.91 billion agreement to expand its footprint in the prolific Delaware Basin. With the deal expected to close in the late third quarter of 2024, the #3 Ranked company is projected to have more than 190,000 net acres in the Delaware Basin on a pro forma basis. Consequently, the company estimates that its production will exceed 180,000 barrels of oil equivalent per day, positioning it for significant growth and enhanced operational scale.
Chevron generates most of its earnings from its upstream operations. The integrated energy giant has a strong foothold in the Permian – the most prolific basin in the United States – where a significant portion of the energy major’s acreage has minimum royalty payments. Thus, CVX will generate handsome cashflows through its upstream business, banking on handsome oil prices.
In addition to maintaining disciplined capital spending, Chevron has a strong balance sheet, providing a solid foundation to rely on during unfavorable energy market conditions.
To expand its premier asset portfolio, SM Energy recently agreed to acquire 80% of XCL Resources’ oil and gas assets in the Uinta Basin for $2.04 billion. The value-driven acquisition, likely to close in September this year, will increase its inventory of net locations and boost its oil production. SM Energy is also committed to maintaining its strong balance sheet, which it can rely on during low oil prices.
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