The big plunge in crude prices is taking a toll on Big Oil.
Exxon Mobil Corp. said Tuesday that fourth-quarter profit fell 58 percent to $2.78 billion. It was the oil giant’s smallest profit since the third quarter of 2002.
Exxon’s core exploration and production business lost money in the U.S. and international earnings plummeted by nearly two-thirds. One of the few bright spots, Exxon’s refining operation, was more profitable than a year ago. That helped Exxon avoid the fate of rival Chevron Corp., which lost money in the fourth quarter.
Britain’s BP said Tuesday that its profit tumbled more than 90 percent.
Exxon shares fell $2.12, or 2.8 percent, to $74.17 in afternoon trading. They began the day down 2 percent so far in 2016.
The amount of oil on the market remains at extraordinarily high levels and producers, with prices so low, continue to drill just to earn what they can. Exxon’s production rose nearly 5 percent. In 2015, the company pumped oil and natural gas equal to 4.1 million barrels a day.
Lower oil prices are causing producers to cut back on new investments. Exxon slashed fourth-quarter capital and exploration spending by 29 percent compared with a year earlier, and it plans to cut that spending by one-fourth, or about $8 billion, in 2016.
Still, Exxon expects to start six new projects this year, from Alaska to Australia. The company believes those projects make sense over the long term.
Exxon was paid about $34 a barrel for U.S. crude in the fourth quarter, down from $63 a year earlier, and a couple of dollars more for oil overseas. The price it got for natural gas fell by about half.
Jeff Woodbury, the company’s vice president of investor relations, said that the oversupply of crude – it’s about 1.5 million barrels a day more than demand – will shrink in the second half as seasonal demand grows. But there are still huge stockpiles of oil, and Woodbury declined to predict when crude prices might increase.
CEO Rex Tillerson called it a “challenging environment,” but said the company is generating enough cash to continue investing in the business.
Exxon’s profit fell from $6.57 billion a year earlier, when oil prices were already beginning to tumble.
The Irving, Texas, company was still able to put up per-share earnings of 67 cents, which was 3 cents better than Wall Street had expected, according to a survey by Zacks Investment Research.
Revenue fell to $59.81 billion, beating the $50.85 billion according to a poll by the data firm FactSet.
Exxon’s profit would have been thinner but for a lower tax bill. The company’s effective rate in the fourth quarter was just 13 percent compared with 34 percent for the full year. A company spokesman said the decline was largely due to reduced earnings and favorable resolution of past tax issues that were booked in the fourth quarter.
For all of 2015, Exxon earned $16.15 billion, or about half what it earned in 2014.
Tillerson, who has been CEO and chairman since 2006, will reach Exxon’s retirement age of 65 in March 2017. In December, the company named Darren Woods president and gave him a board seat, which made him the heir apparent in the eyes of investors.
On a conference call Tuesday, an analyst asked Woodbury when Tillerson will step down. Woodbury said that is up to the board. Tillerson’s predecessor, Lee Raymond, stayed until age 67.