By Jennifer Hiller
(Reuters) - Exxon Mobil Corp and Chevron Corp on Friday reported lower profits due largely to weakness in their refining operations and lower crude oil and natural gas prices.
Both U.S. oil majors reported increased production, but cited lower refining and chemicals margins, and Exxon posted the first loss in its refining business since 2009. Exxon's 49 percent fall in first-quarter profit missed forecasts, showing the turnaround at the largest U.S. oil producer remains a work in progress.
"It was a tough market environment for us this quarter," Exxon Senior Vice President Jack Williams said on a call with analysts.
Wall Street is focused on Chevron and smaller rival Occidental Petroleum Corp's battle to take over Anadarko Petroleum Corp. Occidental made a $38 billion (£29 billion) offer this week that topped Chevron's $33 billion bid.
Chevron Chief Executive Officer Michael Wirth signalled on Friday that Chevron considers itself on track to make a deal for Anadarko. He said the companies have started transition planning, with teams meeting this week on how to combine the shale, deepwater and liquefied natural gas businesses.
"We've got a strong history of successfully integrating two companies and meeting and often exceeding our synergy targets," Wirth said during a conference call with analysts.
"We would not be surprised to see Chevron raise its offer," analysts at Edward Jones wrote in a research note on Friday, saying the company's bid will "ultimately be the successful one."
The Anadarko takeover battle prompted analysts to ask Exxon about mergers and acquisitions in the Permian Basin of West Texas and New Mexico, where a drilling boom has driven U.S. oil output to an all-time record of 12 million bpd.
"I would be surprised if over time we did not pick up some more Permian acreage," Williams said when an analyst asked about possible acquisitions, but added that Exxon "doesn't need to."
Exxon's growing output in the Permian Basin was a bright spot, rising to 226,000 barrels of oil equivalent per day (boepd) in the first quarter. Exxon said it remains on track to produce 1 million boepd by 2024, and would use half of its existing inventory by then.
Exxon continues to spend heavily to boost its oil and gas output, which had been on a years-long slide. Chief Executive Darren Woods has said he believes the company has an opportunity to invest even as peers have focused more on improving cash flow and share buybacks.
Exxon's first-quarter profit fell to $2.35 billion, or 55 cents a share, from $4.65 billion, or $1.09 a share, a year ago. Analysts had expected Exxon to earn 70 cents per share, according to Refinitiv Eikon estimates.
Chevron's oil and gas production rose and profits in its U.S. exploration business jumped 15 percent from a year earlier. Weakness in international exploration refining margins, though, knocked first-quarter net income to $2.65 billion, or $1.39 per share, from $3.64 billion, or $1.90 per share, a year earlier. Wall Street's consensus was $1.30 per share.
Exxon's oil and gas production rose 2 percent overall to 4 million barrels per day (bpd), up from 3.9 million bpd in the same period the year prior.
Chevron's daily production of oil and gas rose to 3.04 billion of barrels, from 2.85 billions of barrels in the year-ago period.
Shares of Irving, Texas-based Exxon dipped 2.9 percent to $79.86 in late morning trading.
Shares of San Ramona, California-based Chevron slipped 1.3 percent to $116.35 in late morning trading.
(Reporting by Jennifer Hiller in Houston; Editing by Chizu Nomiyama, Susan Thomas and Jonathan Oatis)