By Sheila Dang
HOUSTON, April 8 (Reuters) - Higher oil and gas prices due to the U.S.-Israeli war on Iran could boost Exxon Mobil's first-quarter upstream earnings by up to $2.9 billion, outweighing the impact of disruptions to some of its oil and gas production in the Middle East, the U.S. oil producer said on Wednesday.
Downstream earnings, however, could see a hit of about $5.3 billion in part because of timing effects, though Exxon said in a regulatory filing it will see a lift in earnings in later
quarters when oil and gas shipments are delivered.
The conflict that began on February 28 sent oil prices skyrocketing as much as 65%, with some oil and gas fields in the Middle East shutting in production after the Strait of Hormuz - a conduit for a fifth of global energy flows - was effectively closed. Benchmark Brent crude prices averaged $78.38 per barrel during the first quarter, up 24% from the previous three months, according to LSEG data.
Exxon said its first-quarter oil and gas production will be 6% lower due to the war compared with the fourth quarter, when it produced 5 million barrels of oil equivalent per day. Assets in Qatar and the UAE accounted for 20% of Exxon's global oil production in 2025, the company said in the filing.
Exxon will report its full first-quarter results on May 1. Investors closely watch the company's earnings snapshot, which details the market factors that impacted earnings, for signals about how the broader oil sector will perform when results are released next month.
EARNINGS MISMATCH WILL "UNWIND OVER TIME"
Timing effects could lower downstream first-quarter earnings by $3.3 billion to $4.1 billion compared with the fourth quarter.
The "unusually large, negative timing impact" is temporary and results from accounting rules in the trading program, Neil Hansen, Exxon's chief financial officer, said in a statement.
Like other oil firms, Exxon hedges the sale of crude, natural gas and refined products using financial derivatives in order to mitigate the risk of price changes during the time it takes to ship cargoes to customers, which could take weeks between the U.S. and Asia.
The value of the physical shipment is not reflected in earnings until the transaction is complete, the company said in the filing.
"These impacts will unwind over time and result in net positive profit once the underlying transactions are complete. These are sound trades and the profitability that will result from them will be material," Hansen said.
The company said it will record an impairment of between $600 million to $800 million because supply disruptions prevented the physical shipment of cargoes associated with some hedges.
(Reporting by Sheila Dang in Houston; Editing by Nathan Crooks and Lincoln Feast.)
