Energy giant ExxonMobil, the largest U.S. oil company, reported better than expected fourth-quarter earnings Tuesday but revenue fell short of estimates. Revenue rose to $95.429 billion from $84.965 billion a year ago, below the $97.345 billion FactSet consensus. XOM delivered its highest-ever annual profit in 2022 fueled by surging oil prices to resurrect it as one of America’s most profitable companies and erase billions of dollars of losses incurred during the pandemic. Exxon reaped the benefits of its countercyclical investments in oil and gas assets before and during the pandemic. The Covid crisis had primed the company for survival and efficiency and as such benefit from lucrative refining.
ExxonMobil Inc. (NYSE: $XOM) Reported Earnings Before Open Tuesday
Exxon Q4 2022 Earnings
“While our results clearly benefited from a favorable market, the counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering and supplies became tight.,” CEO Darren Woods said in a statement. “We leaned in when others leaned out.”
Exxon booked $43 billion in the first nine months of this year, 19% more than in the same period of 2008, when oil prices traded at a record level of $140 per barrel.
Highlights
- Net income of $12.750 billion, or $3.09 a share up from $8.870 billion, or $2.08 a share, in the year-earlier period.
- Adjusted per-share earnings came to $3.40, ahead of the $3.29 FactSet consensus.
- Revenue rose to $95.429 billion from $84.965 billion a year ago, below the $97.345 billion FactSet consensus.
- Natural Gas Production 8,167 MCFD
- Oil Production 3,822 KOEBD
- Cash flow from operations soared to $76.8 billion last year, up from $48.1 billion in 2021.
- Net-debt-to-capital ratio improved to about 5%, reflecting 2022 debt retirements of $7.2 billion and a period-endcash balance of $29.7 billion, further strengthening the balance sheet and providing greater financial flexibility.
- Non-core asset sales and divestments generated $5.2 billion of cash proceeds during the year
- Achieved best-ever annual refining throughput in North America and the highest globally since 2012
- Operated Permian assets achieved zero routine flaring as of year-end 2022
- Started up one of the largest advanced recycling facilities in North America, capable of processing more than 80 million pounds of plastic waste per year.
Exxon said it incurred a $1.3 billion hit to its fourth-quarter earnings from a European Union windfall tax that began in the final quarter and from asset impairments. The company is suing the EU, arguing that the levy exceeds its legal authority.
XOM Stock Market Reaction
- $111.73 -1.83(1.61%) Pre-Market
- $111.73 +5.22(4.90%) YTD
- $111.73 +35.77(47.09%) Over year
- $111.73 +23.36(26.43%)) Over 5 years
Exxon’s spectacular earnings is a turnaround after it lost a historic proxy fight in 2021 to investment firm Engine No. 1, which mocked Exxon’s finances and argued it had no long-term strategy. This followed the oil-market collapse in 2020 where oil prices were negative for a few days. This led to Exxon’s first annual loss in at least four decades, of more than $22 billion. XOM was removed from the Dow Jones Industrial Average that year, after nearly a century in the index, with its shares falling as much as 55%.
From there Exxon shares rose about 80% for the year, the fourth-highest stock-price increase in the S&P 500 index, only behind oil companies Occidental Petroleum Corp. , Hess Corp. and Marathon Petroleum Corp. , according to Dow Jones data. Exxon also banked $76.8 billion in cash from its operations, behind only Apple and Microsoft so far, according to S&P Global Market Intelligence.
Perhaps a lesson, if you aren’t aware already that organizations like Engine No. 1 are out of touch beyond spreadsheets and wishful thinking.
We refer back to what Woods said in the lat quarter address on that point;
“The investments we’ve made, even though the pandemic, enabled us to increase production to address the needs of consumers. Rigorous cost control and growth of higher-margin petroleum and chemical products also contributed to earnings and cash flow growth in the quarter. At the same time, we are expanding our Low Carbon Solutions business with the signing of the largest-of-its-kind customer contract to capture and permanently store carbon dioxide, demonstrating our ability to offer competitive emission-reduction services to large industrial customers around the world,” concluded Darren Woods, chairman and chief executive officer.
Production
- Production in the fourth quarter was 3.8 million oil-equivalent barrels per day.
- Growth more than offset divestment impacts, as production increased by more than 100,000 oil-equivalent barrels per day compared to the prior quarter.
- The Permian delivered record production in the quarter of more than 560,000 oil-equivalent barrels per day and the company also loaded the first LNG cargo from the Coral South LNG development in Mozambique.
Upstream
- Upstream fourth-quarter 2022 earnings were $8.2 billion compared to $12.4 billion in the third quarter, a decrease of $4.2 billion.
- Earnings decreased mainly from lower prices with both crude and gas realizations down, 15% and 13% respectively, on higher global inventories.
- Positive unsettled derivatives mark-to-market effects of $1.6 billion were driven by the decline in gas prices and more than offset year-end inventory impacts and seasonally higher expenses.
- Identified items unfavorably impacted earnings by $1.1 billion, mainly from additional European taxes on the energy sector partly offset by net favorable divestments and adjustments related to the Sakhalin-1 expropriation. Earnings excluding these identified items decreased $3.1 billion from $11.8 billion to $8.8 billion.
Energy Products
- Energy Products fourth-quarter 2022 earnings totaled $4.1 billion compared to $5.8 billion in the third quarter, a decrease of $1.7 billion.
- Continued strong industry refining margins partially offset an unfavorable derivatives mark-to-market impact of $1.0 billion, mainly due to the absence of prior quarter gains.
- In addition, increased maintenance spend and lower throughput, driven by French industrial actions, were offset by favorable year-end inventory impacts.
- Identified items associated with additional European taxes on the energy sector as well as asset impairments reduced earnings by $0.7 billion. Earnings excluding these identified items were $4.8 billion for the quarter, a decrease of $1.1 billion from the third quarter.
Refining Capacity
Refining throughput for the year was 4 million barrels per day, up 171,000 barrels from 2021 on a current
refinery circuit basis, reflecting best-ever annual refining throughput in North America and the highest globally since 2012.
Chemical Products
Chemical Products fourth-quarter 2022 earnings were $0.3 billion compared to $0.8 billion in the third quarter on weaker margins as a result of continued supply additions and softening demand in North America and Europe partially offset by lower North America feed costs.
Earnings were $1.1 billion lower compared to fourth-quarter 2021 on weaker industry margins and lower sales, reflecting softening market conditions.
Full-year earnings of $3.5 billion were above the 10-year average, though below the record $7.0 billion earned in 2021. Earnings remained strong despite bottom-of-cycle conditions in Asia Pacific, increased supply, and the closure of the regional pricing disconnect between Asia and the Atlantic Basin during the year. In addition, earnings were unfavorably impacted by product mix effects, higher expenses from production capacity additions, and foreign exchange effects from a stronger U.S. dollar.
Specialty Products
Specialty Products fourth-quarter 2022 earnings were $0.8 billion, in line with the third quarter. The robust quarterly performance was driven by improved margins with continued pricing actions and lower energy prices, partly offset by lower volumes on supply length and higher seasonal expenses.
Fourth-quarter 2022 earnings were $0.8 billion compared to $1.1 billion in the same quarter last year, a
decrease of $0.4 billion driven by the absence of prior year identified items associated with asset sales.
Earnings excluding identified items were $0.8 billion, $0.3 billion higher than the same quarter last year.
Financial
- Corporate and Financing reported net charges of $0.5 billion in the fourth quarter of 2022 compared to charges of $0.2 billion in the third quarter, an increase of $0.4 billion driven by the absence of prior quarter identified items related to tax and other reserve adjustments.
- Net charges of $0.5 billion in the fourth quarter of 2022 were down $0.1 billion from the same quarter of 2021.
- Full-year net charges of $1.7 billion declined $1.0 billion from last year, mainly due to decreased pension-related expenses, favorable one-time tax impacts, lower financing costs, and favorable identified item impacts of $0.4 billion associated with tax and other reserve adjustments.
Stock Repurchases and Dividends
The company increased and extended its share-repurchase program with up to $35 billion of cumulative share repurchases in 2023-2024.
The Corporation declared a first-quarter dividend of $0.91 per share, payable on March 10, 2023, to
shareholders of record of Common Stock at the close of business on February 14, 2023.
Capex
Exxon’s spending on new oil and gas projects was last year to $22.7 billion, up 37% from the prior year. The company increased outlays on discoveries in Guyana, in the top U.S. shale field, and on fuel refining and chemicals.
“The counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering,” Exxon Chief Executive Officer Darren Woods said in a statement.
Outlook
“Our plan for 2023 calls for further progress on our strategic objectives, which include leading the industry in safety, operating, and financial performance,” he added. “We will continue to invest in our advantaged projects to deliver profitable growth, help meet society’s growing needs, and reduce emissions in our operations, while providing innovative solutions that help others reduce theirs.”
From Q3 Report:
Exxon on potential LT negative effects of E.U. energy policy Decreasing local investments.
ExxonMobil and QatarEnergy
During the third quarter, ExxonMobil and QatarEnergy signed an agreement to further develop Qatar’s North Field East project, which will expand Qatar’s annual LNG capacity with over 30 million tonnes/year (tpy) by 2026.
Coral South Floating LNG project offshore Mozambique
The Coral South Floating LNG project offshore Mozambique initiated flow of gas in June and is on track to deliver the first LNG cargo in second-half 2022.
ExxonMobil Huge Liza Field Acreage in Guyana
- Sailfin-1 Encountered approximately 312 feet (95 meters) of hydrocarbon-bearing sandstone and was drilled in 4,616 feet (1,407 meters) of water.
- Yarrow-1 Encountered approximately 75 feet (23 meters) of hydrocarbon-bearing sandstone and was drilled in 3,560 feet (1,085 meters) of water.
- A third project, Payara, is expected to start-up by the end of 2023
- A fourth project, Yellowtail, is expected to start-up in 2025.
- ExxonMobil is currently pursuing environmental authorization for a fifth project, Uaru.
Liam Mallon, president of ExxonMobil Upstream Company. “We are committed to responsibly and safely developing this world-class resource to help meet global demand for secure, reliable and lower-emission energy. Our investments through the pandemic have allowed us to increase supply at this critical time, while creating value for the people of Guyana, our partners and shareholders.”
ExxonMobil said their first two sanctioned offshore Guyana projects, Liza Phase 1 and Liza Phase 2, are now producing above design capacity and achieved an average of nearly 360,000 barrels of oil per day in the third quarter.
By the end of the decade, ExxonMobil expects Guyana’s oil production capacity to be more than one million barrels a day.
Source: ExxonMobil AlphaStreet
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