Exxon expects its chemicals and refining business to take a hit in the fourth quarter

on Jan 5, 2020
Updated: Mar 11, 2020
  • Exxon says it expects a sharp loss in chemicals and refining businesses in the fourth quarter.
  • Oil and gas production is expected to print $2.3 billion in operating profit for Exxon in Q4.
  • Exxon's divestment is likely to balance the losses in the chemicals and refining businesses.
  • Exxon plans on extending divestment until the end of 2021 and expects to generate $15 billion.
  • Exxon's performance in the stock market in 2019 remained largely challenged.

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Exxon’s operating income for the fourth quarter is expected to decline as compared to the same quarter last year because of poor performance in the chemicals and refining sector, according to analysts. Experts further highlighted on Friday that the current forecast has been curtailed from 71 cents of earnings per share to a much lower 50 cents of earnings per share in Q4 for Exxon.

However, the anticipated decline does not account for the expected earnings from selling assets that Exxon plans to execute in order to offset the reduction in earnings per share. The American multinational oil and gas company is expected to announce its Q4 earnings report on January 31st.  

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Exxon Recorded $1 Billion In Quarterly Revenue From Its Chemicals Business In 2017

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As per Edward Jones’ analyst, Jennifer Rowland, the Q4 forecast brings bad news for Exxon as its chemicals business is likely to continue weighing on its overall operating income. In a recent filing, Exxon had announced that it expects a significant loss in its chemicals business while refining is also likely to take a hit in the fourth quarter in terms of operating profit.

The forecast is in stark contrast to its performance in 2017 when the company noted $1 billion in quarterly revenue from its chemicals business.  

The filing also highlights that Exxon’s largest business, oil and gas production, is likely to print $2.3 billion in operating profit; a figure that beats the operating profit for the third quarter while remaining significantly shy of what the company recorded in the same quarter last year.

Exxon Plans On Extending Divestments Until The End Of 2021 To Generate $15 Billion

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In order to balance the losses from chemicals division, Exxon plans on selling its Norwegian oil and gas production wing that is expected to boost its quarterly gain to $3.6 billion. The divestment is likely to continue until the end of 2021 and is expected to generate $15 billion for the American oil and gas company.

Rowland also commented that assets sale is applicable to cover for dividends, but is not an efficient or even viable strategy for the long-term.

Exxon currently trades lower than the 2019’s opening level in the stock market. Following the year to date high of $83.38 in April 2019, the stock was seen losing traction that ended in a yearly low of $66.70 in October. As of Friday, the $297.57 billion company is exchanging hands at $70.33.


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