Why Exxon's Q2 earnings fell short — even despite surging oil prices

Exxon's (XOM) second quarter earnings fell short of Wall Street's expectations, despite last quarter's surge in oil (CL=F, BZ=F) prices.

Yahoo Finance Breaking Business News Reporter Jake Conley takes a closer look and explains how Chevron (CVX) differs from Exxon.

Video Transcript

00:00 Speaker A

Exxon Mobile missing second quarter earnings estimates as maintenance costs weighed on results and refining profits fell short of expectations. Why did they miss estimates here, Jake, when this looks like, you know, it should be a very strong backdrop for these energy companies.

00:13 Jake

It should have been and when I woke up this morning, I was expecting to say, both Exon and Chevron, the US's two super majors in energy have a banner quarter. However, Exon got hurt by something very routine, maintenance at their refineries that came at the wrong time. As we were just saying, right now, refinery prices are at all-time highs. The spread that they're able to get from processing crude into diesel or gasoline or marine fuel or jet fuel. But those refineries need maintenance, especially when you're running them at 97%, 98% capacity for months on end. That's a normal part of life for these businesses. They do this, they take the refinery offline. For Exon having to do that and miss out on these prices, that's going to hit their earnings, which is what we saw this morning when they missed estimates.

00:54 Speaker A

Investors, Jake, they may they may treat Chevron and Exxon almost, you know, interchangeably. Should they, in your opinion?

01:03 Jake

They're very similar. They're both huge vertically integrated oil businesses. They do everything, but they are different. Exon's often been seen as the more aggressive growth play. They're a scale play, they're the second biggest energy company in the world only behind Saudi Aramco. They've got a larger chemicals business if you want exposure there. But then you look at Chevron, a little more measured on the growth, but they just had the Hess acquisition that they beat Exon out on. That gets them all that Guyanese offshore territory that's really rich in oil. They've also been putting a lot more effort into their power business, signing some big deals for AI power, AI data centers, getting more and more into that business. They've got a really large LNG portfolio. So they they're similar businesses, but there are key differences for investors to watch out for.

01:46 Speaker A

What about Chevron CFO's comments? What stood out to you there?

01:50 Jake

Yeah, fantastic interview with the CFO there, Emer Banner. A few things that really stood out to me. She said, we don't make decisions based on a volatile environment. And that is the really key question for energy companies right now. Oil prices are yo-yoing. The refining products are at an all-time high for that crack spread, that margin the refiner can get. But the question they've got to think about is how long does that go? You don't make 20-year CAPEX decisions based off six months of volatility. And you've seen people ask, well, why aren't they increasing production? Why aren't they throwing money into that even more so? Because this is these are long-term decisions and we're in a short-term environment right here. So interesting for me to see her call that out specifically.

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