Exxon Anticipates Weak Performance in the Fourth Quarter

Exxon Anticipates Weak Performance in the Fourth Quarter
January 8, 2020

 

In a regulatory filing, oil and gas giant, Exxon Mobil Corp (NYSE:XOM) has mentioned that its fourth-quarter operating results will decrease from the prior year. Specifically, the company forecasts a loss in its chemical division and a sharp decline in operating profit in refining. The energy company is scheduled to post its fourth-quarter earnings on January 31st. The stock closed at $70.29, down $0.58 or 0.82% from the prior close.

The Irving, Texas-based Exxon, which reported an annual revenue of $279.30 billion at the end of December 31st, 2018, had revealed in its regulatory filing that it anticipates a steep decline in its operating profit in the final quarter of 2019 due to sluggishness in the chemicals and refining division, amidst a slump in natural gas and crude oil gas futures prices that worldwide commodity markets had seen throughout 2019.

The company had recorded earnings of roughly $1 billion per quarter in its chemical division until 2017. According to the filing, operating profit in its core business i.e., oil and gas production, could be roughly $2.30 billion on the basis of the midpoint of its outlook, an increase from the third quarter, but down from last year.

Negating the weak results, Exxon will post a gain of nearly $3.60 billion from the sale of its Norwegian oil and gas production, part of a strategy to sell roughly $15 billion in assets by 2021.

According to Jennifer Rowland, an analyst at Edward Jones, the details revealed in the regulatory filing “is like Groundhog day – once again chemicals and downstream weakness will drag down overall earnings.”

Regarding the amount to be generated from asset sales, Rowland said: “The asset sale proceeds will help cover the dividend, but that’s not a sustainable strategy.”

Similarly, in a note to clients, Simmons Energy stated that Exxon’s refining and chemicals division “remain a material headwind to cash flow” as there is no indication that it will reduce capital spending.

Several analysts and economists had trimmed their Q4 earnings outlook for Exxon Mobil Corp. by more than 35% to $0.50 a share, down from the prior forecast of $0.71 per share, as per a report issued by Refinitiv IBES. Nevertheless, the forecast did not include the supermajor’s gain from the divestment of assets.

Other oil majors could be facing a similar problem as a Reuters report indicates that the US recorded a sharp decline in the use of power, diesel, and natural gas by industrial clients in the nine months ended September 2019.

Between July and September, total power consumption by industries declined 1%, compared with the year-ago period, as per the statistics from the US Energy Information Administration. That was the steepest drop since the 2015/16 manufacturing slow down and the 2008-09 financial crisis.

Therefore, we can anticipate the stock of Exxon to drift downwards in the days to come.

Technically, the stock faces resistance at 76. Additionally, the Stochastic RSI indicator is in the overbought region. The next support is anticipated only near 66. Therefore, we are anticipating the downward trend to continue in the short-term.

xom - technical analysis - 8th Jan 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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