Energy giant ExxonMobil, the largest U.S. oil company, reported first quarter net income fell to $8.22B, or $2.06/share, from $11.43B, or $2.79/share from the year-ago quarter and lower than expectations for $2.19. That said the result was still XOM’s second highest Q1 profit in the past decade. Revenues fell 4% Y/Y to $83.08B but were ahead of analyst expectations. The result comes after Exxon reported a $36 billion profit for 2023 boosted by fuels trading and higher oil and gas production. Energy prices and refining margins started to normalize in 2023 and 2024. Earnings across the energy space have been rebalancing by the slump in global natural gas and crude prices since last year’s run up.
ExxonMobil Inc. (NYSE: $XOM) Reported Earnings Before Open Friday
Exxon (XOM) offset some of the decline as oil production rose faster than expected from its Guyana venture and its refineries produced a record amount of fuel for any Q1.
Exxon Q1 24 Earnings:
Highlights
- Adj EPS: $2.06 (est $2.19)
- Revenue: $83.08B (est $80.26B)
- Refinery Throughput 3,843 KBD, (est 3828)
- Production 3,748 KOBED (est 3,804)
- Q1 worldwide production increased 2.5%, as a 0.5% drop in the U.S. and a 5% decline in Asia was offset by a 15.2% boost in Canada and other Americas and a 1.8% gain in Africa.
- Grew performance chemical sales volumes and delivered record first-quarter refining throughput
- Reduced operated methane emissions intensity by more than 60% since 2016
- Investing in technology to extend reach to new high-value, high-growth markets including advanced recycling, ProxximaTM, carbon materials and direct air capture of carbon dioxide
“We’re making great progress on our plans to grow the earnings power of our existing businesses,” CEO Darren Woods said.
XOM Stock Market Reaction
- $118.13 -3.2 (2.64%) Premarket
- $118.13 +2.68 (2.32%) past year
- $118.13 +35.91 (43.68%) past 5 years
- 52wk High 123.75
- 52wk Low 94.89
Exxon’s Buying Spree
Exxon last year put together two big deals back-to-back. It agreed to buy shale rival Pioneer Natural Resources for $59.5 billion and carbon pipeline operator Denbury for $4.9 billion.
“The whole strategy is around making sure that we have the best portfolio and the most resilient portfolio,” said Exxon Chief Executive Darren Woods on a call to discuss results.
The all-stock acquisitions have not hurt the company’s balance sheet with Exxon’s cash reserves up 10% over the second quarter to $33 billion. Chief Financial Officer Kathryn Mikells said. “We feel really good about our cash balance. It puts us in a good position to ultimately ensure we have the flexibility we need when eventually the commodity cycle turns against us.”
Both deals are all stock, there was the much-anticipated purchase of shale giant Pioneer Natural Resources for $59.5 billion and earlier the acquisition of carbon pipeline operator Denbury for $4.9 billion. Growth again driven by projects in Guyana and the Permian. Fellow oil giant Chevron has also been busy on the acquisition trial.
Pioneer Natural Resources
In October 2023, ExxonMobil announced an agreement to merge with Pioneer Natural Resources in a $59.5 billion all-stock transaction1. The transaction was approved by Pioneer shareholders. The transaction close is anticipated in the second quarter of 2024, pending regulatory approval.
Exxon said its production volume in the Permian Basin would more than double to 1.3 million barrels per day once the transaction closes. The deal was Exxon’s biggest since its acquisition of Mobil.
Pioneer transaction transforms Exxon Upstream portfolio
Exxon Mobil in Talks to Buy Shale Giant Pioneer Natural Resources
Denbury
In November, ExxonMobil completed the acquisition of Denbury, Inc. for $4.8 billion of ExxonMobil stock, based on the share price at closing. The company now has the largest owned and operated carbon dioxide (CO2) pipeline network in the United States at 1,300 miles, including nearly 925 miles in Louisiana, Texas and Mississippi, one of the largest U.S. markets for CO2 emissions. The company also has access to more than 15 strategically located onshore CO2 storage sites
Exxon Plans Massive Lithium Plant in Arkansas to Improve Energy Transition Security for the U.S.
Production
- Achieved quarterly gross production of more than 600,000 oil-equivalent barrels per day in Guyana and reached a final investment decision on the sixth major development
Ahead of Earnings ExxonMobil Announce Two New Discoveries Offshore Guyana
Lithium
- In the fourth quarter, ExxonMobil announced its new MobilTM Lithium business with plans to become a leading producer and grow U.S.-based supplies of lithium for the global battery and EV markets.
- The company’s advanced production approach has the potential to produce vast supplies of lithium with fewer environmental impacts than traditional mining operations1. Work is underway for the first phase of lithium production in southwest Arkansas, an area known to hold significant lithium deposits.
- The company is planning first production for 2027. By 2030, ExxonMobil aims to produce enough MobilTM Lithium with the potential to supply approximately one million EVs per year.
Financial
- Achieved $10.1 billion of cumulative Structural Cost Savings versus 2019 with an additional $0.4 billion during the quarter. The company plans to deliver cumulative savings totaling $15 billion through the end of 2027.
- The company’s debt-to-capital ratio was 16% and the net-debt-to-capital ratio was 3%, reflecting a period-end cash balance of $33.3 billion.
- First-quarter earnings were $8.2 billion versus $11.4 billion in the first quarter of 2023. Earnings excluding identified items were $8.2 billion compared to $11.6 billion in the same quarter last year. Earnings decreased as industry refining margins and natural gas prices came down from last year’s highs to trade within the ten-year historical range.
- Timing effects from unsettled derivative mark-to-market impacts and other primarily non-cash impacts from tax and inventory adjustments as well as divestments contributed to the lower earnings.
- Strong advantaged volume growth primarily from Guyana and the Beaumont refinery expansion, and structural cost savings helped to offset lower base volumes from divestments, unfavorable entitlements and government-mandated curtailments, and higher expenses from scheduled maintenance.
Chemicals
- Chemical Products earnings were $785 million, an increase of $414 million compared to the same quarter last year. Despite continued bottom-of-cycle conditions, results improved with higher margins due to lower North American feed costs and higher margins from performance chemicals more than offsetting the decline in industry margins for polyethylene and polypropylene.
- Earnings were further supported by advantaged performance product volumes growth, reflecting advantaged investments including the recent Baytown Chemical Expansion. Base volumes also improved from lower scheduled maintenance and strong reliability during U.S. Gulf Coast weather events.
- Compared to the fourth quarter, earnings improved by $596 million. The absence of prior quarter identified items mainly associated with asset impairments and other financial reserves improved earnings by $388 million. Earnings excluding identified items increased $208 million from the fourth quarter driven by higher base volumes and improved margins from strengthening of the North American feed advantage.
Stock Repurchases and Dividends
- Generated strong cash flow from operations of $14.7 billion and free cash flow of $10.1 billion in the first quarter.
- Shareholder distributions of $6.8 billion in the quarter included $3.8 billion of dividends and $3.0 billion of share repurchases. The share-repurchase program was paused briefly following the Pioneer S-4 filing and resumed after Pioneer’s special shareholder meeting.
- The annual pace of share repurchases will increase to $20 billion per year after the transaction closes, assuming reasonable market conditions.
- The Corporation declared a second-quarter dividend of $0.95 per share, payable on June 10, 2024, to shareholders of record of Common Stock at the close of business on May 15, 2024.
- The company’s debt-to-capital ratio was 16% and the net-debt-to-capital ratio was 3%, reflecting a period-end cash balance of $33.3 billion.
Capex
Achieved $10.1 billion of cumulative Structural Cost Savings versus 2019 with an additional $0.4 billion during the quarter. The company plans to deliver cumulative savings totaling $15 billion through the end of 2027.
Outlook
Woods said, “opportunistically accelerated drilling activity” in its two core oil production areas, the U.S. Permian Basin and Guyana, and kick-started lithium production to supply electric vehicle batteries.
Analysts on XOM
Exxon “closed 2023 on a strong note” and enters 2024 in a strong financial position, said Peter McNally, Global Sector Lead for Industrials Materials and Energy at Third Bridge. “But the big focus for investors will be the closing of the acquisition of Pioneer Natural Resources,” which will dramatically increase investments in the U.S. Exxon expects to close the deal in the second quarter.
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.
- The company announced a final investment decision for the Whiptail development in Guyana. This is the sixth offshore project and is expected to add approximately 250,000 oil-equivalent barrels per day of gross capacity with start-up targeted by year-end 2027. Construction is underway on the Floating Production Storage and Offloading vessels for the Yellowtail and Uaru projects, with Yellowtail anticipated to start production in 2025 and Uaru targeted for 2026. In addition, one new exploration discovery was made this year in the Stabroek block.
Ahead of Earnings ExxonMobil Announce Two New Discoveries Offshore Guyana
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.
Chevron Revenue Increases from PDC Energy, Raises Dividend 8%
Source: ExxonMobil AlphaStreet
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