Pain Worsens for Oil Giants Exxon and Chevron, by Dan Gilbert

It’s not just the little guys getting killed in the oil patch. From Daniel Gilbert at

America’s two biggest oil companies, Exxon Mobil Corp. and Chevron Corp., reported their worst profits from pumping oil and natural gas in more than a decade as low crude prices lopped off billions of dollars from their quarterly haul.

Exxon’s second-quarter profit plunged 52% to $4.2 billion. The energy giant’s division that pumps oil and gas accounted for just $2 billion of that, the lowest level since 2002. Chevron eked out a quarterly profit of $571 million thanks to its fuel-making refineries, which made up for the company’s $2.2 billion loss from pumping oil and gas–the first such loss in nearly 20 years. Chevron lowered its outlook for crude prices and wrote down the value of its energy holdings by $2 billion.
The hard landing fell short of analysts’ expectations, and Exxon and Chevron shares dropped nearly 5% Friday, making them the two worst performers in the Dow Jones Industrial Average.

Global oil prices have fallen more than 50% since last June, and settled Friday at $52 a barrel, the lowest since January. Exxon and Chevron have posted bigger profits during the 2009 downturn and earlier oil busts. But the world’s biggest oil companies are ailing from more than low prices–problems that were masked when oil traded around $100 a barrel.

“The tide’s going out and now we can see what was at the bottom,” said Amy Myers Jaffe, executive director of energy and sustainability at the University of California-Davis.

The cost of unleashing new supplies of oil and gas has soared for the world’s biggest oil companies, as they have spent enormous sums to harvest natural gas from Australia’s remote waters and wring crude from Canada’s oil sands, Ms. Jaffe noted.

To continue reading: Pain Worsens for Oil Giants Exxon and Chevron

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