ExxonMobil (XOM) wants to get back to work.
The energy giant, the largest direct descendant of John D. Rockefeller’s Standard Oil, said on Sept. 16 that it is working to safely restart operations at its Hoover offshore platform in the Gulf of Mexico, Reuters reported.
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The company had shut down the facility ahead of Tropical Storm Francine, which made landfall on Sept. 11 with winds of 100 mph.
Nearly all of Terrebonne and Lafourche Parishes lost power, while roughly one-third of Metro New Orleans suffered a power loss.
As Exxon looks to get its Hoover operation back on line, the company and the rest of the industry are contending with declining crude oil prices due to a slump in industrial demand and a lack of cohesion among OPEC cartel members.
The International Energy Agency said in its September report that global oil demand growth continues to decelerate, with reported first-half gains of 800 kb/d, or thousand barrels per day, year-over-year the lowest since 2020.
ExxonMobil CEO, Darren Woods is wrestling with falling crude oil prices.
ANDREW CABALLERO-REYNOLDS/Getty Images
Exxon beats earnings forecasts
“The chief driver of this downturn is a rapidly slowing China, where consumption contracted year-over-year for a fourth straight month in July, by 280 kb/d,” the IEA said. “The rapid decline in global oil demand growth in recent months, led by China, has fueled a sharp sell-off in oil markets.”
The country’s oil demand is now set to expand by only 180 kb/d in 2024, the report said, ‘as the broad-based economic slowdown and an accelerating substitution away from oil in favor of alternative fuels weigh on consumption.”
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“Surging EV sales are reducing road fuel demand while the development of a vast national high-speed rail network is restricting growth in domestic air travel,” the IEA said.
Outside of China, the agency said that oil demand growth is “tepid at best.”
“Latest data for the United States show a sharp decline in gasoline deliveries in June, following unexpected strength in May,” IEA said. “As such, gasoline use in the world’s largest oil consumer declined y-o-y in five out of the first six months of this year.”
The long decline in crude oil prices has dragged U.S. gasoline prices down in tandem. The AAA Motor Club pegs the average cost at around $3.21 per gallon, compared with the year-ago figure of $3.87 per gallon.
“There are an ever-increasing number of states east of the Rockies that have some retail gas locations selling regular for under $3 a gallon, so drivers will have more in their wallets with autumn approaching,” Andrew Gross, AAA spokesperson, said in a statement. “Should the national average fall below $3, it will be the first time since May 2021.”
GasBuddy is similarly seeing prices fall quickly toward $3 per gallon or lower.
Last month, Exxon beat Wall Street’s second quarter earnings forecasts, posting net income $2.14 per share, up 17% from a year ago and beating analysts’ call for $2.01 per share.
The acquisition of Pioneer Natural, which closed in May, contributed $500 million to Exxon’s earnings.
Revenue totaled $93.06 billion, up from $82.91 billion a year ago, surpassing estimates of $90.99 billion.
Production grew by 15%, or 574,000 barrels per day, to 4.4 million bpd from the first quarter, driven by records in Guyana and the Permian.
Analyst sees ‘headwinds’ for energy group
CEO Darren Woods discussed the company’s global outlook, which projects worldwide energy demand at 15% higher in 2050 than today.
“We see oil demand holding steady at around 100 million barrels per day in 2050, while demand for renewables and natural gas grows considerably,” he said during the company’s earnings call.
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“An energy abundant future, driven by economic growth and rising levels of prosperity, creates opportunity for ExxonMobil, no matter the speed or direction of the energy transition,” Woods added.
Over time, he said, “As it becomes more and more obvious that heavy industry commercial transportation will not be meaningfully powered by renewables, the world will come to rely more on technologies where we have an advantage, including hydrogen, biofuels, and carbon capture and storage.”
Investment firms issued research reports on ExxonMobil on Sept. 16, including Morgan Stanley, which lowered the firm’s price target to $142 from $145 and kept an overweight rating on the shares.
In the third quarter, the energy group has lagged the market by 10% as softening oil prices, slowing inflation, and potential interest rate cuts “all present headwinds for performance,” the firm said.
Against this backdrop, Morgan Stanley said it remains selective and prefers defensive sub-sector positioning among midstream and majors.
The firm said that it favors gas over oil in exploration and production. After revisiting the setup across the North American energy sector, it made price targets and rating changes in the group.
Meanwhile, Mizuho raised the firm’s price target on Exxon Mobil to $130 from $128 and kept a neutral rating on the shares.
The firm reduced its commodity price outlook for the second half of 2024 to 2027 and slashed net asset value-based price targets by 7% across the oil and gas exploration group.
Mizuho said it remained constructive on the fundamentals of the U.S. oil and gas sector despite lowering 2024 and 2025 EBITDA estimates.
While growing macroeconomic fears, resilient U.S. demand, potential for resumption of OPEC+ production and delays on key projects have led to drops in oil prices over the last month, the firm said that “micro” fundamentals for the sector remain strong with operating efficiencies improving, capital discipline holding and stocks offering above-market cash return.
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