ExxonMobil Deliver Strong Earnings, Raises Cash Flow, Pays Down Debt and Raises Dividend

Oil giant ExxonMobil reported better than expected third quarter earnings Friday as oil and natural gas prices hit long term highs. Crude oil and natural gas prices are now up 130% and 70% yr/yr . Cash flow generation saw XOM pay down $4 bln in debt this quarter, the year-to-date total to $11 bln.

Oil giant ExxonMobil reported better than expected third quarter earnings Friday as oil and natural gas prices hit long term highs. Crude oil and natural gas prices are now up 130% and 70% yr/yr . Cash flow generation saw XOM pay down $4 bln in debt this quarter, the year-to-date total to $11 bln.

Exxon Sign


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

 $1.58 Beat $1.56 EPS and $73.786B Beat $73.299 billion revenue forecast

Conference call: 9:30 a.m

Exxon Q3 2021 Earnings

  • Adjusted EPS $1.58, beat estimate $1.56
  • GAAP EPS $1.57 vs. loss/share 15.00c y/y), a $7.4 bln yr/yr increase in quarterly earning
  • Total revenues of $73,786 million beat consensus estimate of $73,299 million and improved from year-earlier figure of $46,199 million, a 60% jump in revenue.
  • Upstream earnings $3.95 billion vs. loss $383.0 million y/y, missing the estimate $4.47 billion
  • Downstream earnings $1.26 billion vs. loss $231.0 million y/y, beating the estimate $830.1 million
  • Chemical earnings $2.14 billion vs. $661 million y/y, beating the estimate $2.11 billion
  • Chemical prime product sales 6,672 kt, +0.7% y/y
  • Downstream petroleum product sales 5,327 kbd, +6.1% y/y Refinery throughput 4,051 mb/d, +7.8% y/y

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 it’s North Sea operations. Exxon also cut its FY21 capex budget by about 45% to $16-19 billion and implemented significant cost-cutting measures.

XOM Q3 20 to Q3 2021

This 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 next year  which it hose announcemed at it’s earnings call

XOM reported upside 3Q21 results that featured a $7.4 bln yr/yr increase in quarterly earnings and a 60% jump in revenue to $73.8 bln. Buoyed by soaring crude oil and natural gas prices, which are now up 130% and 70% yr/yr respectively,

Market  Reaction: XOM 64.47 ▲ 0.16 (0.25%)) Pre Market

  • Exxon Mobil Corp NYSE: XOM 64.47 ▲ 0.16 (0.25%)
  • Chevron Corp NYSE: CVX 114.49 ▲ 1.37 (1.21%)
  • Phillips 66 NYSE: PSX 74.78 ▼ 1.97 (2.57%)

XOM sharply ramped up its production activity.

  • Production 3,665 mboe/d, -0.2% y/y, estimate 3,644
  • Production 8,110 mmcfe/d, -2.5% y/y, estimate 8,345

CapEx

  • Capital expenditure $3.85 billion, -6.8% y/y, estimate $3.82 billion (range $3.47 billion to $4.50 billion)

Upstream

Profits in the upstream segment swung from a loss of $(383) mln in 3Q20 to a gain of $3.9 bln this quarter.

  • Upstream earnings $3.95 billion vs. loss $383.0 million y/y, missing the estimate $4.47 billion

XOM Upstream Q3 2021

Downstream

in the downstream business, reopenings and rising mobility fueled higher margins and improved refining conditions leading to a $1.49 bln rise in segment profit to $1.26 bln.

  • Downstream earnings $1.26 billion vs. loss $231.0 million y/y, beating the estimate $830.1 million
  • Downstream petroleum product sales 5,327 kbd, +6.1% y/y
  • Refinery throughput 4,051 mb/d, +7.8% y/y

XOM Downstream Q3 2021

Chemical

  • Chemical earnings $2.14 billion vs. $661 million y/y, beating the estimate $2.11 billion
  • Chemical prime product sales 6,672 kt, +0.7% y/y

XOM Chemcial Q3 2021

Exxon still benefited from four big drivers in chemical profits:

  1. “increased packaging” ( Amazon.com led e-commerce boom)
  2. “hygiene demand” (Covid-19 masks etc )
  3.  “strong recovery in automotive” (after plunged in 2020)
  4. “durable applications” (Think more household items).

Cashflow

  • Cash flow from operations $12.09 billion vs. $4.39 billion y/y, beating the estimate $11.22 billion
  • Cash flow from operations and asset sales $12.11 billion vs. $4.49 billion y/y
  • Exxon spent $3.1BN on PP&E, with the balance spent on debt paydowns ($3.8BN) as the company continued to strengthen its balance sheet, and dividends ($3.7BN , bringing the YTD total to $11.2BN).

Cash flow from operating and asset sales was dramatic.  In 1Q21 cash flow from operating and asset sales totaled $9.6 bln, bears were pushing the story that XOM could not generate enough cash flow to cover its capital expenditure plans and dividends for the year. Those two items totaled about $30-35 bln in cash.

Fast forward and cash flow from operating and asset sales has climbed to $31.6 bln year-to-date that argument has been quietly put aside by the anaysts pushing it.  Cash flow generation has been so remarkable that XOM paid down $4 bln in debt this quarter, pushing its year-to-date total to $11 bln.

The debt moves have led to an enhanced balance sheet, along with anticipated structural cost reductions of $6 bln annually by 2023 compared to 2019 levels. From here Exxon has taken to raise its quarterly dividend higher to $0.88/share from $0.87/share. XOM is also targeting up to $10 bln in share repurchases over the next 12-24 months, beginning in 2022.

Rome wasn’t built in a day is something the ESG cultists forget, we are remnded by this disconnect from reality at the latest climate summit this weekend.  The world  is moving toward renewable energy sources and as the spike in prices shows, particulaly in natural gas and coal it must be done with a plan. Meanwhile global oil and gas demand will remain healthy, while energy companies scale back on production activities. This leaves a  favorable supply and demand dynamic foe oil and gas prices, producing solid earnings and cash flow generation for XOM barring another global lockdown.

Exxon reported price and margin improvements across all businesses with continued demand recovery; however was offset by unfavorable mark-to-market impacts on open trading strategies with higher prices as well as higher planned maintenance across all businesses.

Exxon benefited from lower corporate and financing expenses and favorable tax items

Last quarter  Exxon said it cut Permian drilling and fracking costs by 40% while taking more than a third out its lease-operating expenses. Explorers are able to get the same amount of output with less rigs compared to a few years ago. Due to growing activist pressure  the company said it achieved record-low flaring intensity in the Permian in the second quarter. Flaring intensity was down 30% compared with 2020. We are seeing the benefit this quarter as prices soared.

Exxon has taken moves to adjust to the new energy landscape with an extensive discussion of Exxon’s ambitions in carbon capture. The company appointed a new director with more to come. First things first, cash flow is the first priority as in all responsible commodity and energy firms in this Covid laced times. Exxon’s giant capex budget, and some would say it’s obsession to maintain it’s dividend led the company to borrow, even before Covid-19 that have caused the problem.

Exxon has worked to reassure investors and Exxon went a long way in doing that at the conference calls.  Exxon Mobil’s debt though is controllable and true to form Exxon has said capex will be lowered before the dividend. This years’s budget  ist he lowest since the merger with Mobil Corp. in 1999. 

Outlook

  • On Track to Achieve ’25 Emission-Reduction Plan by Yr End
  • Sees 4x Increase in Low-Carbon Spend
  • Sees Higher Upstream Volumes in 4Q

“All three of our core businesses generated positive earnings during the quarter, with strong operations and cost control, as well as increased realizations and improved demand for fuels,” said Darren Woods, chairman and chief executive officer

 “Next month, the board will finalize our corporate plan that supports investment in industry-advantaged, high-return projects, and a growing list of strategic and financially accretive lower-carbon business opportunities… expect to increase the level of spend in lower-emission energy solutions by four times over the prior plan, adding projects with strong returns as well as seeding some development investment in large hub projects that require further policy support.” Woods added

  • 2021 capital program expected to be near low end of $16 billion to $19 billion range, so no immediate surge in capital spending which will mean continued high prices as US supply fails to rebound.
  • In 4Q, board will formally approve corporate plan, with capital spending expected in range of $20 billion to $25 billion annually
  • Exxon expects cumulative low- carbon investments to be about $15 billion from 2022 through 2027
  • Sees higher energy costs impacting Europe & Asia refined- product prices in 4Q
  • Exxon’s  revival stock buybacks repurchases for the first time since 2016. The company said it plans to spend as much as $10 billion on repurchases starting next year.

The Intergovernmental Panel on Climate Change has estimated the cost of limiting temperature change below 2 degrees will be much higher without the deployment of carbon capture technology. That certainly gives Exxon grounds to work toward it. – Bloomberg

 

ExxonMobil Huge Liza Field Acerage in Guyana

ExxonMobil earlier in the year said that oil production started from the Liza field offshore Guyana, less than five years after the first discovery of hydrocarbons, well ahead of the industry average. Gross production from the Liza phase 1 development, located in the Stabroek block, is expected to reach a capacity of 120,000 gross barrels of oil per day in the coming months. XOM made a final investment decision during 2Q17 to proceed with the Liza field development located offshore Guyana, where production is expected to start in 2020. The company expects Liza to add up to 120,000 barrels of oil per day to 

Liza HESS EXXON

Source: ExxonMobil

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