TLDR
- Exxon Mobil warned falling crude prices could cut Q4 upstream profit by $800 million to $1.2 billion
- Crude prices dropped sharply in late 2024, with Brent down 19% and WTI down nearly 20% for the year
- Natural gas price changes could impact earnings anywhere from a $300 million loss to a $100 million gain
- Stronger refining margins may add $300 million to $700 million to downstream profit in Q4
- Restructuring charges expected to reduce overall earnings by approximately $200 million
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Exxon Mobil filed a regulatory update ahead of its January 30 earnings release. The company warned that lower crude prices could slash upstream profit by $800 million to $1.2 billion in the fourth quarter.
Exxon Mobil Corporation, XOM
The warning makes Exxon the first major oil company to signal trouble for the upcoming earnings season. Other supermajors may face similar headwinds when they report results in coming weeks.
Oil prices took a beating at the end of 2024. Brent crude dropped 19% for the full year, marking the most substantial annual decline since 2020.
U.S. West Texas Intermediate crude fell nearly 20%. Both benchmarks logged their third straight year of losses, the longest losing streak on record.
The price collapse came as oversupply concerns and tariff pressures outweighed geopolitical risks. These factors dragged down global benchmarks and squeezed upstream margins across the industry.
Natural Gas and Refining Provide Mixed Signals
Beyond crude, natural gas prices could swing Exxon’s quarterly upstream earnings anywhere from a $300 million loss to a $100 million gain. The wide range reflects ongoing volatility in gas markets.
The downstream picture looks brighter. Stronger refining margins could boost earnings by $300 million to $700 million in the fourth quarter.
This potential upside may help offset some of the upstream pain. But it likely won’t be enough to fully compensate for the crude price drop.
Restructuring Costs Add to Pressure
Exxon also disclosed that restructuring charges will trim overall profit by about $200 million. The company announced late last year that its corporate plan focuses on cutting costs and boosting profit.
That strategy aims to help Exxon weather periods of oil price volatility. But the restructuring comes with near-term costs that will hit the bottom line.
Wall Street analysts expect Exxon to report adjusted earnings of $1.66 per share for the fourth quarter. However, some analysts noted many brokers haven’t yet adjusted estimates to reflect the lower oil and gas prices.
Scotiabank analysts said this could lead to downward revisions in earnings estimates. The company posted $5.7 billion in upstream earnings for the third quarter, with total profit of $7.5 billion during that period.
Oil prices declined 9.2% during the three months ended December 31. This drop set the stage for weaker results across the entire energy sector.
Exxon’s snapshot is closely watched for clues on how other oil companies will perform. The guidance suggests Big Oil may be in for a rough quarter when earnings season kicks into full gear.
Analysts currently maintain a Moderate Buy consensus rating on XOM stock based on 11 Buy and seven Hold ratings. The average price target of $132.76 per share implies 12.05% upside potential from current levels.
