Exxon Mobil reported a 49 percent decrease in profits for its third-quarter. The company's profits fell to $3.2 billion as the low oil prices overpowered its increase in production. Despite the relatively massive drop, the company still managed to beat analysts' expectations, which were much lower than what the company had reported.
The oil giant's decrease in profits is also likely due to its slow response to take advantage of America's shale oil boom. However, the company has dramatically increased its spending in the Permian Basin. This has resulted in strong production for the quarter, with a 70 percent increase in its shale output from the Permian Basin.
The significant increase in investment to boost production has accelerated the company's once-stagnant output, raising its total oil production by 4 percent overall. According to Exxon CEO Darren Woods, the company's investments are part of its long-term growth strategy. Exxon is apparently making great progress in that regard and it expects to further increase production in the coming months.
While the company does expect to reap the benefits of its investments in the long-run, the cost of its investments had cut into its profits for its latest quarter. Capital spending jumped by as much as 17 percent for the third quarter, a significant jump when compared to the capital spending of other oil companies for the period.
Exxon's boost in production has however come at a very inopportune time as major factors have worked together to keep a lid on oil prices. These factors include the ongoing trade dispute between China and the United States, tensions in the Middle East, the global economic slowdown, and excess supply.
Oil prices during the third quarter stayed at around $50 per barrel in the US, significantly lower than the $70 a barrel prices over the same period last year. Exxon stated that the weak oil prices had slashed around $1.5 billion from its drilling profit for the quarter. The company's US drilling division saw its earnings drop by 94 percent to just $37 million amid the low oil prices.
Exxon admits that its production growth was offset by the lowered prices. Earnings were also greatly affected by its growth-related expenses in the Permian Basin. Following the release of its earnings report on Friday last week, Exxon saw its shared rise by 1 percent.
The release of Exxon's earnings report comes as the company is facing a number of lawsuits related to its report on the cost of climate change regulation. In New York, the company has been accused of duping investors about its climate change-related spending.
