Exxon profit set to soar again; White House wants more oil

© Reuters. FILE PHOTO: Signage is seen at an Exxon gas station in Brooklyn, New York City, U.S., November 23, 2021. REUTERS/Andrew Kelly

By Sabrina Valle

HOUSTON (Reuters) -Wall Street analysts sharply increased their Exxon Mobil Corp (NYSE:XOM) second-quarter profit estimates on Tuesday, after the largest U.S. oil producer projected it could almost double its first-quarter earnings.

Exxon's preview, released on Friday, signaled strong results ahead by oil companies and refiners and brought renewed criticism from the White House and fresh calls for a windfall profit tax by U.S. lawmakers under pressure from voters feeling pain at the pump.

The White House repeated its call for oil companies to "use their record profits to expand refining capacity, increase supply, and most urgently reduce costs for the American people."

"This would be one of the strongest quarters in Exxon's history," said Credit Suisse analyst Manav Gupta in a note. The disclosures indicated an operating profit of about $16.8 billion, a historic quarterly peak. Official results are due July 29.

Analysts raised their quarterly profit outlook on Exxon to about $4.02 per share from $2.99 a share prior to the Friday securities filing.

The filing showed Exxon expects oil and gas operating profits of more than $10 billion, $4.5 billion from producing gasoline and diesel, and about $2 billion from chemicals and motor oils. Exxon, like other U.S. oil companies, has been plowing higher profits into debt reduction and plans to buy back up to $30 billion of its shares.

At the same time, spokesperson Casey Norton said Exxon was "investing more than any other U.S. company to grow oil and natural gas production." Its U.S. shale output will rise by 25% this year and oil processing at its biggest Texas refinery will grow 250,000 bpd in the first half of next year, he said.

Exxon shares fell 3% to $84.81 on Tuesday as benchmark oil prices slid $10.73 a barrel on worries a possible global recession could hurt demand.

The largest refiner among the U.S. oil majors, Exxon will be a key beneficiary of a tight refined products market, analysts said. "We think this could drive material earnings upgrades," said Biraj Borkhataria, an oil analyst at RBC Capital Markets.

"With many governments subsidizing oil products usage in the near term, we expect refining margins to improve further into the third quarter," Borkhataria said.

U.S. President Joe Biden and lawmakers pointed to the soaring profits as evidence the oil industry is putting profits ahead of customers, contributing to inflation. Exxon, Biden said last month, was making "more money than God".

"If a company’s profits are four times what they were a year ago and it refuses to invest in increased production, the system is broken," said U.S. Senator Ron Wyden, Democrat of Oregon. He called on oil companies to invest in "equipment and more workers, not stock buybacks".

Exxon borrowed heavily during the pandemic and posted a historic $22.4 billion loss in 2020 to finance future production and pay dividends to shareholders.

"High energy prices are largely a result of underinvestment by many in the energy industry over the last several years and especially during the pandemic," said Exxon's Norton.