Oil Slump Pounds Exxonmobil, Chevron Earnings

John Biers, Business Insider
Fri, 07/31/2015 - 11:34am

New York (AFP) - Lower oil prices hammered earnings of US petroleum giants ExxonMobil and Chevron Friday, adding to the industry's woes amid its worst downturn  since the late 1990s.ExxonMobil, the biggest US oil company, said second-quarter profits fell by 52.3 percent year-over-year to $4.2 billion as it reported a loss in its US exploration and production division.The carnage was even worse at Chevron, which reported about a 90 percent drop in profits to just $571 million and pledged a tough line on expenses."Second-quarter financial results were weak, reflecting a crude price decline of nearly 50 percent from a year ago," said Chevron chief executive John Watson."We're getting our cost structure down, through renegotiations across the supply chain and by sizing our contractor and employee workforce to reflect lower activity levels going forward."The big earnings declines came on the heels of a drop in oil prices from the year-ago period, from more than $90 a barrel to a range of $45-$60 a barrel throughout the quarter.Factors driving the tumble in oil prices include the US shale production boom, lower economic growth in China and the resistance of key OPEC producers to cut output in response to the drop in prices.The latest drag on prices is the nuclear accord between Iran and major powers, which is expected to add new oil to the oversupplied market some time after 2015.Major industry figures including BP chief executive Bob Dudley and ExxonMobil chief executive Rex Tillerson have warned that oil prices could be depressed for at least a few more years.- Cutting back -At ExxonMobil, earnings in its profit-leading upstream division, which explores for and produces crude oil, dived about 75 percent to $2.0 billion due to lower oil prices.However, a bright spot in this business was an increase in upstream output of 3.6 percent to 2.3 million barrels a day.ExxonMobil's results were boosted by higher profits in both downstream and chemicals, which are based in part on crude oil as an input.

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