Exxon lifts Q2 outlook to $9.6B as oil surge offsets war

Exxon Mobil expects Q2 upstream income of $9.6 billion, its highest since September 2022, as Brent crude's 23% quarterly surge more than offset $1.2 billion in Middle East disruption losses.

Exxon Mobil Corp. expects second-quarter upstream income to reach $9.6 billion, the highest since September 2022, as Brent crude's 23% quarterly surge more than offset $1.2 billion in losses from Middle East production disruptions.

"Exxon's quarter-over-quarter improvement was driven primarily by higher crude oil prices, stronger refining margins and improved commodity chemicals margins," UBS analysts wrote in a note following the company's July 7 regulatory filing. The bank lowered its second-quarter EPS estimate to about $3.14 from $3.20, citing the $1.2 billion in war-related losses.

The updated outlook places upstream earnings at roughly $9.6 billion for the quarter ending June, compared with $5.7 billion in the first quarter and $5.4 billion a year earlier. UBS also raised its estimate for Energy Products earnings to $3.45 billion from a loss of $556 million in the prior quarter, while Chemical Products are seen at $1.22 billion versus $110 million. Specialty Products earnings are projected at $891 million, up from $651 million in the first quarter. The improvements reflect Brent crude averaging $96.68 a barrel during the April-June period, up 23 percent from the first three months of the year, after the U.S.-Iran war virtually closed the Strait of Hormuz, a chokepoint responsible for about a fifth of global oil flows.

The $1.2 billion in disruption losses — $700 million in upstream, $300 million in Energy Products and $200 million in Specialty Products — show the war's toll on global energy supply chains. Exxon will report full second-quarter results on July 31. Analysts surveyed by LSEG expect adjusted profits of $15.7 billion for the quarter, roughly triple the first quarter's level, a figure that could draw scrutiny from U.S. consumers facing elevated gasoline prices. President Donald Trump has urged oil companies to lower prices at the pump.

War Disruptions Trim $1.2 Billion From Earnings

Exxon said timing effects would provide a $2.6 billion benefit to earnings, largely reversing first-quarter losses from financial hedging on cargo deliveries. The company suffered a multi-billion-dollar loss in the first quarter because of those hedging positions, which it said would "unwind" and result in profitability for subsequent quarters. Exxon also expects to record a $1.1 billion charge related to other items, including reserves, which UBS excluded from its clean earnings estimate.

"If these were to be treated as special items, earnings would be closer to $3.43 per share," the UBS analysts wrote, matching the current Wall Street consensus of about $3.43.

Outlook Tempered by Lower Oil Price Forecast

UBS also lowered its 2027 oil price forecast, now expecting West Texas Intermediate crude to average $75 a barrel, down from a prior estimate of $80. The revision reflects expectations that geopolitical premiums will fade as supply routes normalize. Exxon shares traded at about $140 on Wednesday, up roughly 17 percent year to date, with 11 of 24 analysts covering the stock rating it a "Buy," according to Koyfin data. The stock gained about 4 percent on Tuesday following the earnings update.

The last time Exxon posted upstream income above $9 billion was the quarter ended September 2022, when Brent crude averaged above $100 a barrel following Russia's invasion of Ukraine. The current conflict in the Middle East has produced a similar supply shock, though the duration of disruptions remains uncertain. If the Strait of Hormuz reopens, the unwind of geopolitical risk premiums could pressure both crude prices and Exxon's earnings trajectory in the second half of the year.

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