DALLAS (AP) — Exxon’s profit keeps shrinking because of lower oil prices, and the company is responding by sharply cutting investment in future production.
Exxon Mobil Corp. said Friday that third-quarter income fell 38 percent to $2.65 billion. Still, it was the company’s best quarter this year.
The profit was higher than analysts expected, although revenue was sharply below forecasts.
Chairman and CEO Rex Tillerson said the business environment for his company “remains challenging.”
Oil prices hit longtime lows early this year but have recovered somewhat since then to around $50 a barrel. Exxon said, however, that if average prices don’t improve by year end it may have to reduce its count of proved reserves by up to 4.6 billion barrels, meaning it wouldn’t be economical to pump the oil from the ground.
Exxon said it will examine whether it should write down the value of major long-term assets.
Exxon and other oil companies are cutting capital spending as they ride out the slump in crude prices that began in mid-2014. Exxon invested $4.19 billion, down 45 percent from its capital spending a year earlier. So far this year, Exxon has cut more than $9 billion in production investment.
Some analysts predict that those kinds of cuts will mean less oil and higher prices in coming years.
Exxon’s profit amounted to 63 cents per share, beating the forecast of 58 cents per share from 22 analysts surveyed by FactSet.
In a twist, the company’s chemicals division earned twice as much as the beleaguered oil and gas exploration and production business. Exxon pumped 3 percent less oil and gas from the ground, which the company blamed partly on interruptions to its operations in Nigeria because of fighting there.
Earnings in the refining segment fell on narrower profit margins.
Exxon’s revenue slumped 13 percent to $58.68 billion, well below the analysts’ prediction of $60.41 billion.
Costs dropped 10 percent. Exxon saved more than $1 billion, or 75 percent, on income taxes.
Tillerson, the CEO, said the company delivered solid results in a challenging environment. He said the company was focused on efficiency, strategic investments, and shareholder value.
Lower profits are not Exxon’s only problem. Federal and state officials are challenging Exxon’s openness and accounting for the link between burning oil and climate change.
The company has gone to federal court in Dallas to limit or block investigations by New York and Massachusetts state officials into whether the company hid what it knew about oil’s role in climate change.
The Securities and Exchange Commission is probing how Exxon values its assets given the prospect of tougher regulations to limit climate change.
Exxon has said that the state investigations are politically motivated and an illegal attempt to silence the company from talking about climate change.
In morning trading, shares of Irving, Texas-based Exxon fell $1.30, or 1.5 percent, to $85.62. They are up 4 percent over the past year.