XOM Exxon Mobil Corp

By Bradley Olson and Allison Prang 

America's biggest oil companies surprised investors with quarterly profits that missed expectations stoked by rising crude prices.

Exxon Mobil Corp. and Chevron Corp. Friday reported quarterly net income of $8.4 billion and $3.1 billion, respectively. But most of the gains stemmed from one-time benefits related to the tax changes approved by Congress and signed into law by President Donald Trump late last year.

Exxon said its production fell by about 130,000 barrels a day, and the company reported a $1.3 billion write-down on its natural gas properties, the second year in a row it has had to recognize the declining value of certain prospects.

The company lost money in its U.S. drilling business for the 12th quarter in a row, showing continued problems in an area where it is planning a vast expansion. Earlier this week, Chief Executive Darren Woods said the company would triple its production in the red-hot Permian basin in Texas and New Mexico, investments it said were "enhanced" by the tax overhaul.

"The U.S. results were disappointing," said Brian Youngberg, an analyst with Edward Jones in St. Louis. "Production declines are a continuing challenge for this company. They need to jump-start the growth for investors to get excited again."

The Exxon and Chevron results were in contrast to the companies' big oil counterparts, whose executives have said that rising prices have led them to expect 2018 to be the best year since crude sold for more than $100 a barrel.

Royal Dutch Shell Plc saw profits triple, nearing levels last seen before oil prices crashed in 2014. ConocoPhillips said net income was $1.6 billion, the highest in three years.

Even as the biggest U.S. companies fell short of expectations, the sector is likely to generate more cash in 2018 than they did during some period of the boom era when oil sold for more than $100 a barrel, according to Simmons & Co. The amount of cash in excess of new spending and dividends could approach $40 billion in 2018, the most in more than a decade, according to the analysis.

Healthy global economic growth has created solid demand for oil, pushing up profits all over the world for refining oil into gasoline and other products. In some areas, those margins are set to surge by as much as 15% in 2018, according to Evercore ISI, above levels that were already near records.

Exxon reported a more than $8 billion profit in the last three months of 2017 as it recorded a $5.94 billion benefit from the new tax law. That was up from earnings for the same quarter a year ago of $1.68 billion, or 41 cents a share.

On an adjusted basis, which omits the bump from the new tax law and impairments, earnings fell 2.2% to $3.73 billion, or 88 cents a share. Analysts polled by Thomson Reuters were expecting adjusted earnings per share of $1.04.

Chevron earnings rose more than sevenfold from a year ago, but primarily because of the tax benefit. Net income rose to $3.11 billion, including a $2.02 billion benefit related to tax legislation.

Shares of Exxon fell 5% in Friday morning trade, the most in seven years. Chevron shares dipped 3.5%.

Write to Bradley Olson at Bradley.Olson@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

February 02, 2018 10:38 ET (15:38 GMT)

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