Exxon Mobil Delivers Record Profits Sending XOM Shares to All Time Highs

Energy giant ExxonMobil, the largest U.S. oil company, reported better than expected third-quarter earnings Friday and raised their dividend to reward shareholders. $XOM was boosted by rising oil-equivalent production, higher realized energy prices, strong refining margins and cost cuts. XOM’s third quarter profit was $19.66 billion up from $17.9 billion, its highest ever. The Covid crisis had primed the company for survival and efficiency and as such benefit from lucrative refining. Fellow American Oil giant Chevron posted Q3 net income of $11.23Billion also Friday just short of a record high. On Thursday, Shell, Europe’s largest oil company reported stronger than expected third quarter results of $9.45 billion. XOM stock traded to new all-time highs Friday after the release.

ExxonMobil Inc. (NYSE: $XOM) Reported Earnings Before Open Friday

Exxon Q3 2022 Earnings

Higher natural gas realizations, record product throughput, and continued cost control, were partially offset by lower crude realizations and moderating industry refining margins. Earnings benefited from higher volumes and improved mix from growth in the company’s assets in Guyana and the Permian.

“Where others pulled back in the face of uncertainty and a historic slowdown, retreating and retrenching, this company moved forward, continuing to invest,” Chief Executive Darren Woods told investors. Its quarterly profits “reflect that deep commitment” as well as higher prices, he added.

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

  • Operating profit of $19.66 billion a record
  • Earnings of $18.7 billion, up $1.1 billion versus the prior quarter
  • Exxon Q3 22 Earnings:
  • Adj EPS $4.45 (est $3.89)
  • Revenue $112.07B (est $103.14B)
  • Declared 4Q Div Of $0.91/SHR
  • Paying Out $15B In Div Aggregate for Year
  • Qtr Incl Net Favorable Identified Items of About $1B
  • Best-ever quarterly refining throughput in North America and highest globally since 2008
  • Record Permian production of nearly 560,000 oil-equivalent barrels per day
  • Largest-of-its-kind commercial agreement to capture and permanently store up to 2 million metric tons of CO2 emissions per year
  • Still Sees FY Capex $21B To $24B, (est. $17.77B)
  • United States crude price realization was $91.69 per barrel, significantly higher than the year-ago quarter’s $67.62. For non-U.S. operations rose to $91.42 per barrel from $64.89.
  • United States natural gas prices price realization was $8.38 per thousand cubic feet (Mcf), higher than the year-ago quarter’s $3.33. For non-U.S. section, the metric improved to $22.92 per Mcf from $9.03.
  • Net-debt-to-capital ratio improved to about 7%, reflecting a period-end cash balance of $30.5 billion.
  • The debt-to-capital ratio is now 19%, just below the low-end of the company’s target range.
  • Asset sales and divestments resulted in $2.7 billion of cash proceeds during the quarter, bringing year-to-date proceeds to nearly $4 billion

Stock Market Reaction

  • Record & 52wk High today $111.21
  • 110.19 +2.64 (+2.46%) Pre Market
  • 110.19 +46.65 (73.42%) YTD
  • 110.19 +45.88 (71.34%) Over year
  • 110.19 +27.02 (32.49%) Over 5 years

Third-quarter results included net favorable identified items of nearly $1 billion associated with the completion of the XTO Energy Canada and Romania Upstream affiliate divestments and one-time benefits from tax and other reserve adjustments, partly offset by impairments.

“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

ExxonMobil’s total Oil-equivalent production averaged 3,716 thousand barrels of oil equivalent per day (MBoe/d), higher than 3,665 MBoe/d a year ago. Absent divestments and the Russia exit impact, sequential quarter volume growth was more than 50,000 boe/d.

  • The Permian delivered record production in the quarter of nearly 560,000 boe/d.
  • Offshore Guyana quarterly average gross production increased to nearly 360,000 boe/d, with Liza Phase 1 and 2 production exceeding design capacity.
  • In addition, two new discoveries were announced in the Stabroek block, adding to the company’s extensive portfolio of development opportunities.

Liquid production increased to 2,389 thousand barrels per day (MBbls/d) from 2,313 MBbls/d in the prior-year quarter. The outperformance was owing to higher production, primarily in the United States and Canada.

Natural gas production was 7,963 million cubic feet per day (Mmcf/d), down from 8,110 Mmcf/d a year ago primarily due to lower output from the United States and Canada.

Upstream

ExxonMobil reported quarterly upstream earnings of $12,419 million, improving from $3,951 million in the year-ago quarter. Higher commodity prices primarily drove the upside. Excluding identified items, earnings were $11.8 billion, an increase of around $800 million from the previous quarter.

Operations in the United States recorded a profit of $3,110 million, skyrocketing from $869 million in the September-end quarter of 2021. The company reported a profit of $9,309 million from non-U.S. operations, improving from $3,082 million in the year-ago quarter.

Energy Products

The segment of ExxonMobil has recorded a profit of $5,819 million, up from $529 million a year ago due to strong industry refining margins. Higher aromatics, marketing and trading margins also aided the segment. The impact of lower industry refining margins was partially offset by higher aromatics, marketing and trading margins. Industry refining margins remained strong on high global diesel demand yet declined 30% from second quarter levels due to higher refinery runs and flat US gasoline demand.

Refining Capacity

Third-quarter refining throughput was 4.2 milloin b/d, up 177,000 bbl from the second quarter. This reflects best ever quarterly refining throughput in North America and the highest globally since 2008. ExxonMobil’s refining throughput in first-half 2022 was up 180,000 b/d versus the first 6 months of 2021 to meet recovering product demand.

There have been 3 million barrels a day of global refining capacity shutdown since the onset of the pandemic in 2020. It’s a situation that could take years to fix until additional capacity comes online. Much has to do with poorly thought and politicalized energy transition policy against fossil fuels towards renewable without a plan which led to the energy crisis engulfing the world, before Russia’s attack of Ukraine.

Chemical Products

ExxonMobil recorded an $812-million profit, compared with $1.1 billion in the second quarter and down from $2,027 million in the year-ago quarter on lower volumes and margins from bottom-of-cycle conditions in the Asia Pacific, and weaker demand in Europe and North America.

Record quarterly sales volume for performance polyethylene helped upgrade product mix, which served as a partial offset to lower volumes.

Specialty Products

ExxonMobil recorded a $762-million profit, down from earnings of $839 million in the year-ago quarter primarily due to the higher feed cost environment.

Financial

ExxonMobil generated a cash flow of $27,107 million from operations and asset divestments. The company’s capital and exploration spending were $5,728 million.

At the end of third-quarter 2022, ExxonMobil’s total cash and cash equivalents were $30,407 million, and long-term debt amounted to $39,246 million.

Stock Repurchases and Dividends

ExxonMobil has announced a fourth-quarter dividend of 91 cents per share, indicating an increase of 3.4% from the last paid dividend of 88 cents. The dividend is payable on Dec 9.

Capex

Capital and exploration expenditures were $5.7 billion in the third quarter, bringing year-to-date 2022 investments to $15.2 billion, on track with full-year guidance of $21-24 billion.

Last quarter Exxon said it is working to meet global energy demand through its plans to expand early next year a refinery in Beaumont, Texas, by 250,000 barrels a day, the largest such expansion since 2012. It also noted it has boosted production in the Permian Basin of West Texas and New Mexico by 130,000 barrels of oil-equivalent a day compared with the first half of 2021.

“Those investments are really helping to increase production at a time when the world needs it most,” Exxon Chief Financial Officer Kathryn Mikells said, noting its capital and exploration spending was up about 40% year-over-year.

Outlook

Exxon on potential LT negative effects of E.U. energy policy Decreasing local investments

Exxon Outlook for Q4 22, maintenance impact. Key to maintaining these numbers is maintenance.

Politics, Survival and Big Oil

The turnaround is remarkable when you consider that a multitude of companies file for bankruptcy following the worldwide outbreak of Covid-19 in 2020. Exxon and Chevron posted historic losses that year, and Exxon got kicked off the Dow Jones Industrial Average as energy sunk to less than 2.5% of the S&P 500.

Oil and gas shares have outperformed the market this year, with the S&P 500 Energy index up about 35% since the start of 2022, compared with a 15% drop for the broader index. Since the start of 2022, Exxon and Chevron shares are up about 46% and 26%, respectively, while the energy sector has grown to more than 4% of the S&P 500.

US President Biden and Democrats in Congress are desperate ahead of midterm elections in November and desperate to change the narrative and redirect blame on energy policy. In June, Mr. Biden was asked if he would go after Exxon’s profits. “We’re going to make sure everybody knows Exxon’s profits,” he said. “Exxon made more money than God this year.”

He is also has authorized the biggest sale of SPR reserves in history which has still not kept oil prices much under $100 a barrel. This has fueled the US oil to record exports and therefore profits. What the Administration fails to grasp is refinery capacity is full and as such crude is exported, helping the US deficit and the oil majors. Is that a bad thing? Depends on your narrative.

Oil and gas prices have soared since the global economic lockdowns and widespread travel restrictions reversed. What the hardships did was lead XOM to sell off non-core assets such as its North Sea operations. This continues to put XOM in a much sturdier position and one able to benefit from the surge oil and gas prices leading to a dramatic turnaround to the point where it can increase its dividend and begin share repurchases.

From the depths of despair just a few years ago Exxon has overtaken Alphabet in corporate free cash flow for the first time in four years. Jeff Currie of Goldman Sachs called the shift the “revenge of the old economy”

ExxonMobil and QatarEnergy

During the 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.”

Liza HESS EXXON

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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