Exxon Mobil Corp (XOM.N), the world's largest publicly traded oil company by market value, posted lower-than-expected quarterly profit on Thursday as it failed to offset declining production with fresh reserves.
Shares of Exxon fell nearly 2 percent to $93.28 in morning trading.
The problem of declining production has become endemic for multinational energy groups, with legacy oil and natural gas wells producing much less. That has fueled massive and risky exploration projects in an attempt to find new wells in remote regions.
Exxon's oil and natural gas production fell 1.8 percent from
year-ago levels, with natural gas production falling around the world and oil output slipping in half the regions where the company operates.
The results reflected a "mediocre quarter" for Exxon, especially in international production, Edward Jones analyst Brian Youngberg said.
"They've lost momentum already, reverting back to declining production and stagnant earnings," Youngberg said.
Exxon rival Royal Dutch Shell Plc (RDSa.L) said on Thursday the fourth quarter was its least profitable in five years as its own production slipped.
To assuage Wall Street, Exxon Chief Executive Officer Rex Tillerson promised in a statement that the company will ramp up exploration projects over the next two years to find newer reserves.
Investors said they were eager for more details of Tillerson's plans. The company will hold a conference call at 11 a.m. EST (1600 GMT).
"If it's done in the context of normal exploration, or a change in the makeup of demand, that's probably a positive," said Oliver Pursche of Gary Goldberg Financial Services, who manages Exxon shares for clients. "If it's as a result of existing wells are drying up, that's a negative."
For the fourth quarter, Exxon Mobil posted net income of $8.35 billion, or $1.91 per share, compared with $9.95 billion, or $2.20 per share, in the year-ago period.
Analysts expected earnings of $1.92 per share, according to Thomson Reuters I/B/E/S.
Earnings fell in all of the company's units, including refining, where weaker margins eroded profit.
Refiners make more money when the price difference between various types of crude oil is wide. When the gap narrows in the price difference between West Texas Intermediate crude oil and Light Louisiana Sweet crude oil, as it has in recent months, costs tend to rise.