Exxon Mobil Corp. posted a 1 percent drop in quarterly earnings on Thursday, missing expectations, as weaker natural gas prices and output offset higher margins from gasoline and chemicals.
Shares fell nearly 2 percent to $91 before the bell.
The company's production dipped 1 percent on an oil equivalent basis from last year due to field decline and lower European demand for natural gas.
Net income in the second quarter decreased to $10.26 billion, or $1.83 a share, from $10.36 billion, or $1.72 a share, last year. Earnings per share rose because the number of Exxon's outstanding shares dropped nearly 7 percent through the company's aggressive buyback program.
The average forecast of Wall Street analysts was $1.96 a share, according to Reuters Estimates.
I think the street was a little optimistic on the downstream, which was very strong, said Gene Pisasale, who helps manage about $25 billion at Mercantile Capital Advisors, a unit of PNC Wealth Management.
He noted the company came in well-ahead of estimates last quarter, which may have prodded analysts to ratchet up their forecasts.
They got hurt by the non-U.S. natural gas realizations, he said.
The company's European natural gas prices fell nearly 14 percent to $6.67 per thousand cubic feet. Its price for other natural gas sales outside the U.S. fell 10 percent to $6 per thousand cubic feet.
Exxon's U.S. natural gas prices rose 8 percent to $6.94 per thousand cubic feet.
This is the second straight quarter Exxon has complained of soft natural gas demand in Europe. In the first quarter, the company attributed the weakness to warmer-than-normal winter weather.
Earnings from its exploration and production segment fell over 16 percent to $5.95 billion. Exxon's profit from its downstream unit rose 36 percent to $3.39 billion.
Integrated oil companies that both produce and refine oil and gas were expected to have yet another in a series of stellar quarters as soaring refining margins picked up the slack for a year over year drop in oil prices.
Through Wednesday's close, Exxon's shares are up about 21 percent this year, just underperforming the Chicago Board Options Exchange's oil index, which rose nearly 22 percent in the same period.
(Additional reporting by Matt Daily)