Exxon Mobil Corp boosted its 2017 capital budget on Tuesday by about 14 percent on a bet that crude prices have stabilized, but posted its lowest quarterly profit since 1999 as it took a $2 billion charge from the purchase of natural gas producer XTO Energy.
The world’s largest publicly traded oil producer wrote down more than $2 billion from its 2009 buyout of natural gas producer XTO Energy, a deal worth roughly $30 billion at the time. The writedown is a tacit acknowledgement from Exxon that natural gas prices are not likely to rise substantially in the near future.
The boost in capital expenditures and the writedown reflect a delicate balancing act by oil and natural gas companies in an era of extreme volatility after a two-year price rout.
Wall Street traders expect oil prices to stay near their current range, between $54 and $55 per barrel, for several years and for natural gas prices to remain near their current level, about $3.13 per million cubic feet. <0#CLCAL:>
Exxon said it will increase spending to about $22 billion this year from $19.3 billion in 2016. The move came after peers Chevron Corp, Hess Corp and other oil producers boosted their capital budgets for the year.
The higher spending is not due to rising prices for oilfield contract work or other services, Jeff Woodbury, Exxon’s vice president of investor relations, said on an earnings conference call with investors.
“It is, by an large, a function of activity level” increasing, Woodbury said.
Exxon’s announcement came after the company posted a better-than-expected quarterly profit, helped by rising oil prices and lower costs.
The results reflected the slow and steady improvement in the global oil and gas industry as commodity prices inch higher after a two-year rout.
The quarterly report was Exxon’s first under Chief Executive Officer Darren Woods. Rex Tillerson, the former CEO, has been nominated by U.S. President Donald Trump to be secretary of state and is awaiting confirmation.
Fourth-quarter earnings fell to $1.68 billion, or 41 cents per share, from $2.78 billion, or 67 cents per share, in the year-ago period.
Excluding the $2 billion writedown, Exxon earned 90 cents per share. By that measure, analysts expected 70 cents per share, according to Thomson Reuters I/B/E/S.
Production fell 3 percent to 4.1 million barrels of oil equivalent per day.
Earlier this month Exxon said it would pay up to $6.6 billion to double its holdings in the oil-rich Permian Basin of west Texas, the largest oil field in the United States.
Shares of Texas-based Exxon fell 1 percent to $83.95 in mid-day trading.
(This article has not been edited by DNA’s editorial team and is auto-generated from an agency feed.)