Exxon earnings beat, but profit falls 63%

ExxonMobil, the world's largest non-state-owned oil company, saw steep revenue and profit declines in the first quarter but still beat Wall Street expectations.

The Irving, Texas-based Exxon on Friday reported first-quarter earnings per share of 43 cents, compared with the 30 cents estimated by analysts polled by S&P Global Market Intelligence. That's down 63% from $1.17 per share last year.

Exxon's net income of $1.8 billion slightly missed the $1.9 billion that analysts expected — and represents the energy company's lowest quarterly profit in more than a decade, according to Bloomberg.

Declining profits have been the norm from energy companies lately, as they bear the brunt of low oil prices worldwide. Also on Friday, Chevron reported a first-quarter net loss of $725 million, with earnings of 39 cents per share, compared with net profit of $2.57 billion, or $1.37 per share, in the same period last year.

What Exxon Mobil, Chevron say about coming quarters will be key

Chevron's first-quarter revenue of $23.6 billion, however, surpassed S&P Global Market Intelligence estimates of $22.7 billion.

Wall Street had low expectations for the oil giants with U.S.-produced crude having hit a 13-year low of less than $27 per barrel during the quarter. Oil has risen recently to more than $46, thanks to discussions about an OPEC production freeze and a weaker U.S. dollar.

"I think expectations were definitely low due to oil prices, which directly affect these companies' income statements," said Luana Siegfried, equity research associate at Raymond James & Associates. She noted that Exxon and Chevron had significant tax benefits in the quarter, "helping to alleviate what would have been worse results otherwise."

Exxon said it had focused on cutting costs to help make up for lower energy prices and refining margins. Capital expenditures were down 33% to $5.1 billion, while production increased 1.8% to the equivalent of 4.3 million barrels of oil daily, the company said.

“The organization continues to respond effectively to challenging industry conditions, capturing enhancements to operational performance and creating margin uplift despite low prices,” said Exxon Mobil Chairman and CEO Rex W. Tillerson in a statement.

First-quarter sales fell 28% to $48.7 billion, compared with $67.6 billion in the January-to-March period in 2015. Analysts had expected revenue of $50.1 billion.

Exxon Mobil loses AAA credit rating from S&P

The company's upstream earnings fell to a $76 million loss, down from $2.9 billion from the first quarter of 2015. However, its chemical earnings grew to $1.4 billion, up $982 million last year.

Exxon (XOM) shares closed up  0.4% at $88.40 on Friday. The stock is up 12.9% so far this year, and up 0.8% from a year ago. The S&P 500 is up 1.6% this year, but down about 0.5% over the past 12 months.

Chevron (CVX) shares closed down 0.2% to $102.18.

Exxon's first-quarter financials come just three days after Standard & Poor's downgraded ExxonMobil's corporate credit and long-term debt rating from AAA to AA+. Then, on Wednesday, ExxonMobil increased its dividend to 75 cents, payable June 10, up 2 cents from the dividend paid last year.

A "surprising to negative" sign, was that Exxon's operating cash flow of $4.8 billion did not fully cover the company's capital expenditures and it borrowed the $3 billion to pay the dividend, Siegfried said. "That's exactly why the S&P downgraded (Exxon) this week," she said, "based on rising leverage metrics and a focus on returning cash to shareholders."

The 4.3 billion production mark is the slowest year-over-year growth since 2014. she said. Coupled with the decline in capex spending and Exxon provides," Siegfried said, "an illustration of the industrywide austerity."