Exxon Disappoints on Non-Cash Charges Despite Guyana Boost

(Bloomberg) -- Exxon Mobil Corp. posted disappointing results after a bevy of non-cash charges took the shine off surging oil output from its marquee development in Guyana.

First-quarter profit of $2.06 a share was 13 cents shy of the average analyst estimate in the Bloomberg Consensus. Exxon shares dropped as much as 3.2% in pre-market trading.

Despite the earnings shortfall, cash flow from operations of $14.7 billion was $1 billion higher than forecasts, boosted by the more than 35% uplift in Guyanese crude production.

“Any given quarter we’ll have a number of non-cash, just a bit more unusual expenses that kind of ebb and flow,” Chief Financial Officer Kathy Mikells said in an interview. “This quarter we had a number of small ones that added up together to be more significant and that’s difficult for analysts to model.”

Expectations for Exxon were high going into earnings season because of a shift in investor sentiment that favors oil-production growth. Exxon started output at Payara, its third Guyanese development, ahead of schedule late last year, adding 220,000 barrels of daily supplies that earn profits even if crude plunges to the $35 mark. 

Exxon was down 1.7% at 6:36 a.m. in New York.

“We continue to bring projects in more quickly and under budget so we’ve just had great execution in Guyana,” Mikells said, noting that gross daily production is now more than 600,000 barrels, up from 440,000 in the final three months of 2023. 

Exxon’s performance in Guyana underscores why arch-rival Chevron Corp. wants to get into the project via a $53 billion takeover of Hess Corp., which has a 30% stake. Exxon claims it has a right-of-first refusal over Hess’s stake while Chevron says that doesn’t apply because its deal is a corporate merger. 

Arbitration is still in its “very early days,” Mikells said. Each side has chosen one arbitrator who will sit on a panel of three, she said. Hess this week extended the closing date of its deal with Chevron by six months to October.

Exxon’s capital spending was $5.8 billion in the first quarter, nearly a third lower than the previous three month period when the company incurred some added Guyana costs. If that level of spending is repeated for the rest of the year, annual capital expenditure would come in at the low end of the company’s $23 billion to $25 billion guidance. 

Exxon’s accounting charges were non-cash items associated with tax and inventory balance sheet adjustments, Mikells said. The company also had higher expenses from scheduled maintenance at its facilities. 

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