By Jennifer Hiller
HOUSTON (Reuters) - Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX) on Friday reported lower profits, citing lower margins and refining weaknesses, areas that have plagued the two oil companies off and on for more than a year.
Exxon posted the first loss in its refining business since 2009, citing the worst refining margins on gasoline and other profits it had seen in a decade. Chevron reported its refining and chemical profits fell 65 percent.
Both reported top-line figures that missed Wall Street expectations and were lower than year-ago levels due to weaker crude pricing.
Exxon's 49 percent drop in first-quarter profit showed the turnaround at the largest U.S. oil producer remains a work in progress.
"It was a tough market environment for us this quarter," Exxon Senior Vice President Jack Williams (NYSE:WMB) said on a call with analysts.
Exxon continued to spend heavily to boost output, with capital spending up 42 percent over a year ago as it poured new investment into its shale and offshore operations. Investors have been pressing oil companies to cut back on spending and increase returns to shareholders.
Its first-quarter profit fell to $2.35 billion, or 55 cents a share, from $4.65 billion, or $1.09 a share, a year ago. Analysts had expected Exxon to earn 70 cents per share, according to Refinitiv Eikon estimates.
"Clearly, the corner is further away than we expected and we expect this to lead to underperformance in the near term," analysts at RBC Capital Markets said in a client note.
At Chevron, investors ignored earnings that beat estimates and focused on its $33 billion bid for rival Anadarko Petroleum Corp (NYSE:APC).
Occidental Petroleum Corp (NYSE:OXY) on Wednesday sought to derail Chevron's offer with a unsolicited, $38 billion bid for Anadarko.
Chevron Chief Exectuive Michael Wirth told analysts on Friday joint integration planning to combine the two companies had begun. He declined to say if it would raise its offer for Anadarko, saying it had a signed agreement with Anadarko.
"We would not be surprised to see Chevron raise its offer," wrote analysts at Edward Jones in a research note, saying they believed the company's bid will "ultimately be the successful one."
Chevron's production rose and achieved higher profit from its U.S. shale business, offsetting some of the drop in international oil and gas earnings. But sharp declines in overall refining and chemicals knocked first-quarter net to $2.65 billion, or $1.39 per share, from $3.64 billion, or $1.90 per share, a year earlier. Wall Street had expected $1.30 per share.
Chevron's daily production of oil and gas rose to 3.04 billion of barrels, from 2.85 billions of barrels in the year-ago period, boosted by a 55 percent increase in its Permian output.
The Anadarko takeover battle prompted analysts to ask Exxon about new acquisitions in the Permian Basin of West Texas and New Mexico, the top U.S. shale field.
"I would be surprised if over time we did not pick up some more Permian acreage," Williams said. He added that Exxon "doesn't need to."
Growing output in the Permian Basin was a bright spot at Exxon, rising to 226,000 barrels of oil equivalent per day. It remains on track to produce 1 million barrels by 2024, and would use half of its existing inventory by then, he said.
Exxon's oil and gas production rose 2 percent overall to 4 million barrels per day (bpd), up from 3.9 million bpd in the same period the year prior.
Shares of Irving, Texas-based Exxon dipped 2.8 percent to $79.88 in early afternoon trading.
Shares of San Ramona, California-based Chevron slipped 2 percent to $115.99 in afternoon trading.