Energy giant ExxonMobil, the largest U.S. oil company, reported better than expected first-quarter earnings Friday. XOM produced more oil to overcome lower energy prices. ExxonMobil reported adjusted earnings of $11.43 billion or $2.83 a share, ahead of a consensus $2.60 on FactSet and up from a year-ago profit of $5.48 billion, or $1.28 a share. Revenue fell 4.8% to $86.6 billion, but that also beat estimates. Production increased by nearly 300,000 barrels of oil equivalent a day driven by projects in Guyana and the Permian.
ExxonMobil Inc. (NYSE: $XOM) Reported Earnings Before Open Tuesday
Exxon Q1 2023 Earnings
“Our people’s hard work to execute on our strategic priorities delivered a record first quarter following a record year,” said CEO Darren Woods. “We are growing value by increasing production from our advantaged assets to meet global demand.”
“At the same time, our Low Carbon Solutions team is rapidly growing this new business with an additional carbon capture, transportation and storage agreement that underscores the company’s growing momentum in providing industrial customers with large-scale emission reduction solutions,” Woods added.
Highlights
- Exxon earned a record $11.43 billion, or $2.79 per share, for the three months ended March 31.
- Adjusted earnings of $2.83 a share, ahead of a consensus $2.65 and up from a year-ago profit of $5.48 billion, or $1.28 a share
- Revenue was $86.56 billion, down from $90.5 billion a year earlier, but was above the FactSet consensus of $85.65 billion.
- Upstream $6,615 million, declining from $7,743 million in year-ago quarter.
- ExxonMobil’s total production averaged 3,831 thousand barrels of oil equivalent per day (MBoe/d), higher than 3,675 MBoe/d a year ago.
- Liquid production increased to 2,495 thousand barrels per day (MBbls/d) from 2,266 MBbls/d in the prior-year quarter.
- Natural gas production 8,016 million cubic feet per day (Mmcf/d), down from 8,452 Mmcf/d a year ago
- ExxonMobil US crude price $73.95 per barrel, non-U.S. operations $67.93 per barrel
- Natural gas prices in the US $3.20 per thousand cubic feet (Mcf), non-U.S. $17.39 per Mcf
- Energy Products profit of $4,213 million
- Chemical Products $371 million profit
- Specialty Products $774 million profit
- Cash flow of $17,195 million from operations and asset divestments.
- Capital and exploration spending was $6,380 million.
- $8.1 billion returned to shareholders during the quarter, including $4.3 billion from share repurchases and the rest through dividend payments.
- Debt-to-capital ratio remained at 17%
- Net-debt-to-capital ratio declined to about 4%, reflecting a period-end cash balance of $32.7 billion.
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.
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
- $119.18 ▲ +2.35 (+2.01%) Pre-Market
- $119.18 ▲ +31.99 (+36.69%) past year
- $119.18 ▲ +42.28 (+54.98%) past 5 years
Production
- ExxonMobil’s total production averaged 3,831 thousand barrels of oil equivalent per day (MBoe/d), higher than 3,675 MBoe/d a year ago.
- Liquid production increased to 2,495 thousand barrels per day (MBbls/d) from 2,266 MBbls/d in the prior-year quarter. T
- Outperformance primarily in the United States and Canada.
- Natural gas production was 8,016 million cubic feet per day (Mmcf/d), down from 8,452 Mmcf/d a year ago, primarily due to lower output from the United States and Canada.
Price Realization:
- In the United States, ExxonMobil recorded crude price realization of $73.95 per barrel, significantly lower than the year-ago quarter’s $93.51. The same metric for non-U.S. operations declined to $67.93 per barrel from $89.71.
- Natural gas prices in the United States were $3.20 per thousand cubic feet (Mcf), lower than the year-ago quarter’s $4.80. In the non-U.S. section, the metric improved to $17.39 per Mcf from $16.42.
Upstream
- Upstream quarterly earnings (excluding identified items) of $6,615 million, declining from $7,743 million in the year-ago quarter.
- Operations in the United States recorded a profit of $1,632 million, which decreased from $2,376 million in the March quarter of 2022.
- XOM reported a profit of $4,983 million from non-U.S. operations, deteriorating from $5,367 million in the year-ago quarter.
- The main drivers were lower prices, with crude and natural gas realizations down 10% and 23%, respectively, and unfavorable unsettled derivatives mark-to-market effects of $2.0 billion, largely reflecting the absence of a positive mark-to-market impact in the prior quarter.
- These impacts were partially offset by robust cost control and seasonally lower expenses, the absence of year-end inventory effects, and favorable volume/mix effects from advantaged growth in the Permian, Guyana, and LNG. Identified items unfavorably impacted earnings by $158 million this quarter, down from $561 million in the previous quarter.
Energy Products
- Energy products recorded a profit (excluding identified items) of $4,213 million, reversing from a loss of $196 million a year ago primarily due to the Beaumont refinery expansion start-up.
- Positive drivers were volume and mix improvements driven by reliable operations and the Beaumont refinery expansion start-up and the absence of unfavorable prior-quarter unsettled derivatives.
Refining Capacity
Exxon successfully completed the ramp-up of the Beaumont Refinery expansion, demonstrating 250,000 barrels per day of crude distillation capacity and expanding its integration advantage by capitalizing on the growth of lighter crude oil from the Upstream’s Permian assets.
Refining throughput for 2022 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 recorded a $371 million profit (excluding identified items), down from $1,405 million in the year-ago quarter on lower industry margins.
Specialty Products
Specialty Products recorded a $774 million profit (excluding identified items), up from earnings of $476 million in the year-ago quarter, primarily due to increased volumes, thanks to demand recovery in China.
Financial
- ExxonMobil generated a cash flow of $17,195 million from operations and asset divestments.
- The company’s capital and exploration spending was $6,380 million.
- At the end of first-quarter 2023, ExxonMobil’s total cash and cash equivalents were $32,651 million, and long-term debt amounted to $39,150 million.
Stock Repurchases and Dividends
- Shareholder distributions of $8.1 billion included $4.3 billion of share repurchases, keeping the company on track to repurchase up to $17.5 billion during the year.
- The Corporation declared a second-quarter dividend of $0.91 per share, payable on June 9, 2023, to shareholders of record of Common Stock at the close of business on May 16, 2023.
The company increased and extended its share-repurchase program with up to $35 billion of cumulative share repurchases in 2023-2024.
Capex
The company’s capital and exploration spending was $6,380 million for Q1 2023.
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 last quarter in a statement.
Outlook
For 2023, XOM expects to meet its guidance for capital and exploration expenditures of $23 billion to $25 billion, cutting costs by around $9 billion by the end of the year.
Woods told CNBC Friday that cash “isn’t burning a hole in our pocket”, and that while the group is always looking for strategic transactions, a bigger cash position “doesn’t change the value proposition” of any potential target.
Recall earlier in the month the Wall Street Journal reported Exxon has held preliminary takeover talks with shale fracking specialists Pioneer Natural Resources.
Exxon Turnaround
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 last year in an 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.
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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