Exxon Mobil Corporation, the largest U.S. oil company, faced a setback in its first-quarter earnings, missing analysts’ expectations by a notable margin.

Despite significant gains in its operations in Guyana, the company reported a 28 percent year-on-year drop in profits.

In the first quarter of this year, Exxon Mobil recorded earnings of $8.22 billion, or $2.06 per share, compared to $11.43 billion, a year ago.

This decline was primarily attributed to weaker refining margins and lower natural gas prices, which offset the volume gains achieved by the company.

One of the notable highlights for Exxon Mobil in the quarter was its performance in Guyana. The company has been making significant investments in Guyana’s offshore oil fields, and these efforts have started to pay off with substantial production gains.

However, these gains were not sufficient to offset the challenges faced in other areas of the business.

The stock market reacted to the news, with Exxon Mobil’s stock experiencing a 2% decline in pre-market trading, dropping to $118.50 per share.

Analysts had anticipated earnings per share of $2.20, but the actual figure of $2.06 fell short of these expectations by 6%.

Earnings from oil and gas production saw a 14% decrease, mainly due to lower natural gas prices. Additionally, the refining segment experienced a significant decline of 67% attributed to weaker margins and increased investment and tax costs.

However, the chemicals business emerged as a bright spot, with earnings more than doubling thanks to lower input costs and higher margins.

Exxon Mobil Remains Optimistic Despite Challenges

Despite the challenges faced in the first quarter, Exxon Mobil remains optimistic about its long-term prospects. The company is in the process of finalizing a $60 billion deal for Pioneer Natural Resources, a top shale oil producer, which is expected to further strengthen its position in the market.

Earnings of US$8.22 billion for the first quarter ended March 31 were off 29% compared to adjusted profit of US$11.62 billion a year earlier.

But the results were the second highest for a first quarter in the past decade, behind the year-ago period, said Chief Financial Officer Kathryn Mikells. The miss was due in part to tax and inventory balance sheet adjustments, she said.

“Every quarter, we have some pluses and minuses associated with these one-off items. Sometimes they are favorable, this time they were unfavorable,” Kathryn Mikells said.

Global oil prices were largely flat against a year ago while natural gas prices fell sharply. U.S. gas futures traded 20% lower at the end of the quarter compared to a year-earlier.

Results were boosted by lower costs and higher volumes from Exxon’s Guyana operations. Hess a day earlier flagged the increase in output in the South American country with a 70% year-over-year output gain.

Exxon’s capital spending last quarter was the lowest in seven quarters and its streamlining of operations expanded what it calls structural cost savings by $400 million.

Exxon Mobil’s performance in the first quarter highlights the volatile nature of the oil and gas industry, where external factors such as commodity prices and market conditions can significantly impact financial results.

As the company continues to navigate these challenges, its focus on strategic investments and operational efficiency will be crucial in driving future growth and profitability.