Exxon Mobil (XOM, Financial) is set to report its Q3 results in late October, highlighting the impact of declining oil prices and weaker refining margins on its earnings. The company anticipates a hit to its Q3 profits due to these factors, with an estimated $600 million to $1 billion loss in its upstream business from softer oil prices and another $600 million to $1 billion loss from significantly lower industry refining margins, which are normalizing from the historically high levels of the previous year.
- Offsetting these challenges are changes in timing effects and scheduled maintenance, particularly in the refining sector. Analysts still expect XOM's EPS to slightly increase year-over-year in Q3, driven by record crude oil production.
- In Q2, XOM's upstream business saw a 15% increase in net production, contributing to its second-highest quarterly earnings in the past decade. The acquisition of Pioneer Natural Resources on May 3, 2024, led to record production in the Permian Basin, boosting upstream earnings by $1.5 billion year-to-date as of June 30, 2024.
- Despite weaker refining margins in Q3, XOM forecasts a modest increase of approximately $100 in refining margins for chemical and specialty products. Lower feed and energy costs are helping to offset the subdued demand environment.
Overall, XOM's Q3 update reflects a challenging business climate with a 17% drop in crude oil prices during the quarter. However, market attention is shifting towards the conflict between Israel and Iran, which has led to a 10% increase in crude oil prices since September 26. Prices may rise further if tensions escalate and Israel targets Iran's oil infrastructure.
