Exxon Warns Oil & Gas, Refining Losses To Hit Q2 Results

Exxon Mobil Corp (XOM) warned that it expects to post operating losses at its refining as well as at its oil and gas businesses in the second quarter.

The U.S. oil producer estimates that the second-quarter operating profit of its oil and gas unit will be between $2.5 billion and $3.1 billion lower than in the first quarter due to energy prices falling, according to a SEC filing.

The fast spread of the coronavirus pandemic has curtailed energy demand as oil prices dropped over 30% this year spurring production cuts. Refining results are poised to take a hit of between $800 million and $1.1 billion compared with the first quarter as margins contracted, the company said.

The Street expects Exxon to post a loss for the quarter of $2.3 billion, or 57 cents per share after reporting a $610 million loss in the first quarter. The company is expected to report its quarterly results on July 31.

Following the financial guidance update Cowen &Co. analyst Jason Gabelman reiterated a Hold rating on the stock with a $34 price target (23% downside potential), and forecasted that Exxon will post a loss of 69 cents per share in the second quarter.

“Given the current environment, XOM will likely need to continue defending its long-term view of energy growth that underpins its counter-cyclical capex program that could ramp back up next year,” Gabelman wrote in a note to investors.

Exxon Mobil shares, which have lost more than a third of their value this year, advanced less than 1% to $44.08 as of the close on July 2.

Overall, Wall Street analysts share Gabelman’s cautious stock outlook. The Hold consensus breaks down into 10 Hold ratings and 3 Sell ratings versus 1 Buy rating. Meanwhile, the $49.09 average price target implies 11% upside potential in the shares over the next year. (See Exxon Mobil’s stock analysis on TipRanks)