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Exxon Mobil shares sink as earnings fall short of analyst expectations

Tax reform helped drive Exxon Mobil Corp.'s fourth quarter 2017 earnings 400% higher on the period to $8.4 billion, but the company's shares dived as adjusted results missed expectations.

At noon ET, Exxon was down $5.12, or 5.73%, on the NYSE to $83.95 per share.

After adjustments, the company's fourth-quarter 2017 earnings were $3.7 billion, or 88 cents per share, 2% below the same quarterly period in 2016 and below analysts' estimates as its global downstream and chemical units struggled. For the period, the S&P Capital IQ consensus normalized earnings estimate for Exxon Mobil was $1.03 per share.

A $5.9 billion benefit from the U.S. tax reform was offset by a $1.3 billion impairment related to upstream assets in Canada and dry gas assets in the Gulf of Mexico, Exxon vice president of investor relations and secretary Jeff Woodbury said Feb. 2 during the company's quarterly earnings call.

Exxon's cash flow was $8.8 billion for the fourth quarter of 2017 and $33.2 billion for the full year, which included proceeds associated with asset sales of $3.1 billion.

"During the year, ExxonMobil generated $14.3 billion of free cash flow, up nearly 50% from 2016, primarily due to the strong price environment and our disciplined approach to investing," Woodbury said.

For the full year 2017, the California-based oil and gas major's production was 4.0 million barrels of oil equivalent per day, down 3% from the prior year.

Exxon indicated earlier this week that it intends to triple its oil and natural gas production from operations in the Permian Basin to more than 600,000 boe/d by 2025.

The expansion is part of a larger plan announced Jan. 29 by Exxon Chairman and CEO Darren Woods, who said the company would invest more than $50 billion in its U.S. assets over five years in light of the recent tax reform in the U.S.

During the Feb. 2 earnings call, Woodbury said two thirds of this $50 billion investment will be injected into Exxon's U.S. upstream business.

The company's U.S. upstream earnings totaled $7.1 billion in the fourth quarter of 2017, including $7.6 billion for tax reform and asset impairments of $481 million. U.S. upstream earnings, excluding U.S. tax reform and charges, posted a loss of $60 million.

Exxon is following in the footsteps of many of its peers, who have paid billions of dollars to make heavy, strategic investments in the Permian Basin. In early 2017, Exxon spent more than $6 billion to more than double its Permian Basin potential by acquiring privately owned companies with an estimated resource of 3.4 billion boe in the Delaware Basin.

In 2017, Exxon's total capital and expenditures were $23 billion, up 20% from 2016. For the fourth quarter 2017, the company spent $9 billion, which included acquisitions in Mozambique and Brazil.

"Looking ahead, we anticipate our 2018 capital and exploration expenditures will be about $24 billion. While we continue to invest across all segments, this increase compared to 2017 is primarily driven by higher investment in short cycle upstream opportunities, notably U.S. non-conventional activity and conventional work programs, both of which yield attractive returns at $40 per barrel," Woodbury said.