What happened
Oil companies have certainly had their share of big moments recently, but ExxonMobil (XOM -2.78%) was a downer of a stock on Thursday. The energy giant's shares fell by almost 4% following a business update from the sprawling company. That tumble was notably more drastic than the 0.8% fall of the S&P 500 index on the day.
So what
Traders' reaction was understandable, as ExxonMobil said in a regulatory document filed late on Monday that it anticipated reporting lower-than-expected earnings for the second quarter, which ended June 30.
In that rather terse document, the bellwether energy company said that a number of headwinds had pushed its profitability below its previous forecasts. In Q2, it forecast its net profit could end up being as low as $6.2 billion; in the first quarter, that figure, according to GAAP standards, was $11.4 billion.
The main culprit in the anticipated decline was the downward trend in natural gas prices. According to ExxonMobil's new guidance, this dynamic could reduce its total net income by $4 billion.
Now what
It should be emphasized that the $6.2 billion on the bottom line is the worst-case scenario for ExxonMobil's new financial model. The best case, which anticipates items like derivatives contracts and a rise in margins for chemical products, is a profit of $9.6 billion.
While ExxonMobil will still be highly profitable -- $6 billion-plus in a quarter, of course, is nothing to sneeze at -- a sharp downward lurch in profitability is concerning. Perhaps the glory days of this oil boom are coming to an end.
