(Adds CEO comment and graphic, updates share price, full-year results)
By Jennifer Hiller
HOUSTON, Jan 31 (Reuters) - Exxon Mobil Corp on Friday reported a 5.2% drop in fourth-quarter profit on weaknesses in chemicals and refining and flat oil and gas output, with asset sales helping to stem the decline.
Oil companies last quarter suffered from weaker prices for their products, and in Exxon's case it has been spending heavily to boost its oil output to reverse production declines.
Shares were down 3% to $62.86 in early trading. The stock has dropped about 29% since Chief Executive Darren Woods took over three years ago.
Exxon’s full-year profits of $14.3 billion fell short of the potential $25 billion that Woods forecast last March at the company’s investor day.
“There’s no doubt that 2019 was a challenging year for a number of our businesses,” Woods said on a Friday morning call with analysts, noting that prices and margins are near or at 10-year lows for natural gas, refining and chemicals.
Exxon is betting that a growing global middle class will drive demand for its products despite what Woods called the "short-term impact" of excess supply. "We believe strongly that investing in the trough of this cycle has some real advantages," he said.
Its production in the Permian Basin, the largest U.S. shale field, was up 54% from a year ago to around 294,000 barrels of oil and gas daily. But quarterly profits on U.S. production were down 74% as the company spent heavily to boost output and suffered from lower natural gas prices.
Overall, the exploration and production business, its largest, benefited the most from the sale of production assets in Norway for $4.5 billion to Vår Energi AS.
Analysts said the weakness across its businesses means Exxon will still have to borrow to cover its shareholder dividend. Investors have been pushing oil companies to improve their returns by increasing dividends or share buybacks. Exxon has frozen its share repurchases except for offsetting dilution for employee awards.
"Unlike its peers, the company is not generating free cash flow given its large capital spending program," said Jennifer Rowland, analyst with Edward Jones.
Exxon’s $355 million loss in chemicals mirrors that of rival Royal Dutch Shell, and was the first loss in that business in at least 13 years, said Biraj Borkhataria, analyst with RBC Capital Markets, adding “we do not expect a significant recovery” in 2020.
Oil majors have added and expanded plants to boost plastics production but now face a global chemicals glut and tariffs on U.S. exports to China. Exxon’s chemicals business regularly generated $1 billion in quarterly profit as recently as 2018.
Its refining business earned $898 million, down 67% from last year, on lower margins.
Net income attributable to Exxon fell to $5.69 billion, or $1.33 per share in the quarter from $6 billion, or $1.41 per share, a year earlier.
Excluding one-time items, per share earnings were 41 cents, below Wall Streets expectation of 43 cents, according to Refinitiv. Analysts earlier this month had slashed estimates from 71 cents after the company warned of weakness in chemicals and refining.
The largest U.S. oil producer's oil and gas output rose less than 1% to 4.02 million barrels per day in the quarter, the sixth quarter in a row of year-over year gains.
Earlier this week, the company raised its Guyana oil estimates by 2 billion barrels, bringing total recoverable oil and gas resources from the discovery to more than 8 billion barrels.
Reporting by Jennifer Hiller in Houston and Arathy S Nair in Bengaluru; Editing by Andrea Ricci and Steve Orlofsky