By Bradley Olson, Erin Ailworth and Sarah Kent 

Exxon Mobil Corp. reported its worst quarterly results since 1999 on Friday, the latest in a parade of woeful earnings from oil and gas producers world-wide for the first three months of 2016 as a global supply glut dragged down prices and ate into profits.

Yet despite a 63% drop in profits to $1.8 billion, investors shrugged off Exxon's performance and its shares rose 1.2% to $89.28 in early trading -- mirroring a trend that has generally pushed oil and gas stocks up after first-quarter earnings as crude prices this week rise to their highest levels of the year, spurring optimism in the oil patch.

Many companies including oil majors BP PLC and Total SA, and independent producers such as Pioneer Natural Resources Co., saw their shares rise after reporting first-quarter earnings because they either swung to a profit or reported smaller losses than anticipated.

BP said earlier this week its net loss shrunk nearly 80% from the prior quarter. On Wednesday France's Total and Norway's Statoil ASA said they were back in the black last quarter after suffering losses in the last three months of 2015.

The results reflect aggressive cost cuts, including slashing spending plans for drilling and laying off large numbers of workers, that companies have made to cope with a nearly two-year slump in crude prices. Along with a surge in oil prices, which have risen more than 70% from a February low past $45 a barrel this week, the results have helped fuel a 9% rally in energy stocks in the S&P 500 index in the past month.

"The market is already looking past these results since oil is up almost 80% from earlier lows," said Brian Youngberg, an energy analyst with Edward Jones. "The expectation was that earnings were going to be really bad for the entire sector, but many companies did better."

Not every company followed the trend. Chevron Corp. reported a $725 million loss on Friday compared with a profit of $2.6 billion in the first quarter of 2015. The greater-than-expected drop was the first time in at least two decades that Chevron had two consecutive quarterly losses.

Italian oil giant Eni SpA said Friday it had racked up a nearly billion-dollar loss for the quarter, though its share price fell by only 0.35% on Friday since the results weren't as bad as many investors predicted.

In the U.S., the extreme belt tightening by oil companies is finally leading to declines in crude output that are expected to help rebalance the global market. Federal figures show U.S. oil production fell below 9 million barrels a day a few weeks ago, after peaking at 9.7 million in April 2015.

"Industry spending could be set to decline to levels not seen since 2007," analysts at Citi Research said Monday, adding that additional cuts "should be sufficient to deliver the necessary declines in global production, with balance appearing within reach in the second half of 2016."

Irving, Texas-based Exxon reported a profit of $1.81 billion, or 43 cents a share, down from $4.94 billion, or $1.17 a share, a year earlier. Analysts polled by Thomson Reuters expected a per-share profit of 31 cents. Revenue dropped 28% to $48.71 billion.

Some experts have warned that the draconian cuts oil companies are making may make it harder for them to quickly ramp up production later whenever prices rebound.

Scott Sheffield, chief executive of Pioneer, which reported a first-quarter loss of $267 million, said his company will look to add up to 10 rigs -- one or two at a time -- if the price of a barrel of oil improves to about $50 a barrel.

But Mr. Sheffield, whose company is one of the primary producers in the Permian Basin of Texas, one of the lower-cost U.S. shale regions, said few of his U.S. industry peers can do the same unless prices rise to $60 a barrel, and companies sell assets, raise equity, and pay down debt.

"There's more debt in this downturn than I've ever seen," he said Wednesday at a conference in New York. "You need at least $50 billion to $100 billion in deleveraging before you see a pickup, a significant pick up, in rig counts."

The first-quarter results showed that some separation may be occurring among U.S. shale producers based on the regions where they are most active.

Hess Corp., a driller in North Dakota's higher-cost Bakken Shale formation, which has been hard hit by the oil bust, reported a $509 million loss in the first quarter, smaller than expected. Chief Executive John Hess said Wednesday his company won't increase its drilling rig count in the Bakken until West Texas Intermediate prices move closer to $60 a barrel.

"We do not believe that accelerating production in current price environment makes sense," he said, adding that the company plans to reduce its rig count in the Bakken play to two rigs from the current three by the third quarter.

While the cost-slashing has helped oil and gas producers protect their balance sheets, it's had a devastating impact on another part of the business -- the oil-field services providers that drill and pump wells.

Halliburton Co. took a $2.1 billion restructuring charge during the quarter, stemming from severance costs and writing down the value of assets and infrastructure no longer needed in the current market. Baker Hughes Inc. reported a $981 million loss for the quarter, on revenue that declined 21% from the previous quarter, to $2.7 billion.

Even Schlumberger Ltd., the world's largest oil-field services company, isn't immune. Chief Executive Paal Kibsgaard said exploration and production companies "displayed clear signs of operating in a full-scale cash crisis" during the first quarter.

In North America, producers are cutting budgets by as much as 50% this year, Schlumberger said. The company expects international spending to fall about 20%.

"This is the toughest environment we have seen for 30 years, and it is likely to get even tougher before the market returns," Mr. Kibsgaard said.

Alison Sider and Nicole Friedman contributed to this article.

 

(END) Dow Jones Newswires

April 29, 2016 11:42 ET (15:42 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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