Overview
Exxon Mobil said adjusted earnings for the first quarter were $1.16 per share, surpassing the LSEG consensus of $1.00. The adjusted figure omits a $700 million loss related to cargoes that could not be delivered because of the conflict between the U.S.-allied nations and Iran. When the company also excludes the effects of financial derivatives timing, earnings amounted to $2.09 per share.
Bottom-line and operating backdrop
On a reported basis, Exxon’s net income for the quarter was $4.2 billion, down from $7.7 billion in the year-ago period and marking its lowest quarterly profit since the first quarter of 2021. Management attributed the divergence between adjusted and reported results to both the undelivered cargoes and a sizable negative timing impact tied to the accounting of financial derivatives.
Executives said the company benefited from higher oil prices and from production gains in its largest upstream positions in the Permian Basin and offshore Guyana. Those strengths helped offset production disruptions tied to the conflict in the Middle East, which the company said reduced first-quarter output by 6% versus the prior three months.
Timing effects from derivatives
Exxon uses financial derivatives to hedge the risk of price changes that can occur during the period between when cargoes are sold and when they are delivered. The company explained that the economic value of the physical shipment is not reflected in earnings until the underlying sale and delivery are recorded, which can create a timing-related impact on reported results.
Chief Financial Officer Neil Hansen said the bulk of that timing impact typically unwinds within a few months, but he cautioned that further timing effects are difficult to predict and will depend on the path of commodity prices.
Middle East exposure and operational damage
About 20% of Exxon’s oil and gas production is located in the Middle East. That exposure is notable relative to some peers; the company said another major U.S. oil producer reported less than 5% of its production is sourced from the region. Exxon noted that the conflict had not only reduced production but also affected some liquefied natural gas infrastructure, as the company holds stakes in two LNG facilities in Qatar that were struck in Iranian attacks.
Executives indicated the war in the Middle East tested company operations. In a statement, the company’s chief executive said the firm is stronger than it was a few years ago but that recent events in the Middle East tested that strength, adding that the safety of employees remained the top priority. During a conference call with analysts, management anticipated questions about timelines to repair damaged assets in the region, which account for a substantial portion of Exxon’s LNG portfolio.
Asset performance and production trends
Exxon emphasized that its most significant upstream assets remain the Permian Basin and its offshore operations in Guyana. Hansen reported that production in Guyana reached a new record during the quarter and said the company continues to expand output in the Permian.
Cash flow, capital allocation and expenditures
Free cash flow in the quarter was $2.7 billion, down from $8.8 billion in the comparable prior-year quarter. During the period, Exxon returned capital to shareholders through $4.3 billion in dividend payments and $4.9 billion in share repurchases. Cash capital expenditures totaled $6.2 billion and were reported to be in line with the company’s full-year guidance.
Context on earnings drivers
The company has previously disclosed a multi-billion-dollar hit from timing effects related to derivatives, which it expects to reverse in subsequent quarters as the hedges and physical transactions settle. The impact of the Middle East conflict has pushed oil prices higher since late February, but the effect on oil major profits has varied across companies, in part because of differences in exposure and trading operations.
What management highlighted
Management framed the quarter as a test of operational resilience: higher commodity prices and growth in core basins helped mitigate the direct hit from regional disruptions and the accounting timing items. At the same time, executives acknowledged that the size and timing of derivative-related impacts will move with commodity markets and can be difficult to forecast precisely.
Implications for stakeholders
For investors and analysts, the quarter illustrated a separation between adjusted metrics that strip out timing and event-related items and the reported accounting measure. The company’s capital allocation in the quarter continued to prioritize shareholder returns alongside ongoing investment in key upstream projects.
End of report