January 6, 2024 [Yahoo Finance]- Exxon Mobil Corporation XOM indicated that its fourth-quarter 2023 operating profits could have declined from last year’s peak levels due to the drop in oil and gas prices.
The company expects an operating results of $8.9 billion for the fourth quarter, suggesting a decline from the $12.7 billion net profit reported in the fourth quarter of 2022.
ExxonMobil signaled slightly weaker profits for the fourth quarter. The company expects declining oil prices to lower earnings of its production business. It also anticipated changes in oil prices to decrease upstream earnings in the quarter by $400-$800 million, whereas it reported $6.1 billion in the third quarter.
ExxonMobil expected the decrease in Q4 earnings due to lower oil prices to have been partially offset by higher natural gas prices. The increase in natural gas prices is likely to have aided the upstream business’s profits by $400-$800 million.
Additionally, a decline of $1.5-$1.7 billion in refining earnings is expected to be partly mitigated by a gain of $1-$1.4 billion in unsettled derivatives. Moreover, the margins in the company’s chemical units are anticipated to result in $300-$500 million of sequential improvement in earnings in the fourth quarter.
Weak commodity prices are likely to have affected the energy businesses in the fourth quarter. Per Zacks Earnings Trends, the energy sector is likely to have generated $37.1 billion in earnings in the fourth quarter of 2023, suggesting a decline from the $47.8 billion recorded in the prior-year quarter.
ExxonMobil is experiencing a significant decline in earnings, causing upheaval in the energy sector. This is primarily due to two factors — the company’s strategic departure from offshore operations in California and the global decline in oil prices. ExxonMobil’s shift in operational strategy has broad implications for the energy market.
Zacks Rank & Stocks to Consider
Currently, ExxonMobil carries a Zack Rank #3 (Hold).
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cenovus Energy Inc. CVE is a leading integrated energy firm. The Zacks Consensus Estimate for CVE’s 2023 and 2024 earnings per share (EPS) is pegged at $1.69 and $2.37, respectively.
Cenovus stands out in terms of financial stability compared with its industry peers, maintaining a stronger balance sheet. This is evident from its consistently lower debt-to-capitalization ratio, which remains at 20%.
Sunoco LP SUN is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. The Zacks Consensus Estimate for SUN’s 2023 and 2024 EPS is pegged at $5.19 and $3.83, respectively.
Sunoco has a core competency in terms of its history of disciplined expense management. Over the past few years, it has demonstrated a remarkable ability to control total operating expenses, with an annual growth rate of only around 2% since 2019.
The Williams Companies WMB is a premier energy infrastructure provider in North America. WMB has a thriving deepwater transportation business. The company’s deepwater portfolio includes a 3,500-mile natural gas and oil gathering and transmission pipeline, and is important for future cash flows.
WMB’s debt maturity profile is in good shape, with its $4.5-billion revolver maturing in 2023. It is also paying shareholders an attractive dividend yielding around 5%. Beside this, the company has a share repurchase program worth $1.5 billion, highlighting its commitment to shareholders.
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