Earnings Reports

Google Ad

Oil giant ExxonMobil reported better than expected second quarter earnings Friday as oil and natural gas prices hit long term highs after the Covid pandemic. The chemical segment hit record profits with surging plastic prices.

Exxon Sign


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

 $1.10 Beat $0.997 EPS and $67.74B Beat $64.64B billion revenue forecast

Conference call: 9:30 a.m

Exxon Q2 2021 Earnings

  • Q2 Adj EPS $1.10 vs. Loss/Shr 70.0C Y/Y, and beating exp. of $0.9997
  • Revenue $67.74B, EST. $64.64B
  • Q2 Capex $3.80B, beating exp. $3.31B, but looking ahead Exxon sees FY capex on the low end of its $16B to $19B guidance
  • Q2 Upstream Earnings $3.19B, Est. $3.05B
  • Q2 Downstream Loss $227M, Est. Loss $155.6M
  • Q2 Chemical Earnings $2.32B, Est. $1.94B
  • Q2 Production 3,582 Mboe/D, Est. 3,683
  • PET industry margins in Europe and North America were between 200% and 300% higher compared to Q1 2019

 

Market  Reaction: XOM $57.76 ▼ 1.18 (-1.99%) Pre Market

Exxon Q2 2021 Prices

Chemical

Exxon Q2 2021 Chemical

Exxon said there were four big drivers behind the surge inn 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).

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

Upstream

Exxon also reported upstream production of just 3.58 million barrels a day due to "government-mandated curtailments" and lower seasonal gas demand in Europe, which while higher than the 3.395 million b/d expected, was the lowest in at least 15 years, according to Bloomberg data.

Exxon Q2 2021 Upstream

Of note, 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.

Exxon Q2 2021 Permian

Downstream

Exxon Q2 2021 Downstream

Cash Position

Exxon Q2 2021 Cash

After the aggressive debt issuance in 2020, the company is in deleveraging mode, reporting $2.7 billion in debt reduction in the quarter, which was just below the $3.7 billion paid out to shareholders as dividends. XOM got $9.7 billion in cash from operations.

While the debt paydown was significant it was lower than the $4 billion cuts in 1Q. As a result, net debt now stands at about $57.1 billion, down $7 billion from year-end 2020.

 

Earnings Preview

Exxon Mobil Corp. (NYSE: XOM) report Q2 earnings on Friday with projected EPS: $1.01 on projected revenue of $64.64 billion

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 Mobil Corporation NYSE: $XOM

Market Reaction:

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  isthe lowest since the merger with Mobil Corp. in 1999. 

Exxon Assumptions From Q4 2000 Q1 2021

Note at time of writing Oil and Natural gas are significantly higher as of 7/28/2021 WTI and Brent Oil are both over $72 bbl and Henry Hub Natural gas is trading around $4 btu for the front month.

The purpose is more comparison to illustrate the move in these commodity prices

Exxon specific breakeven oil price assumptions.

  • Expects to cover this year’s low capex figure and the dividend at somewhere between $45 and $50 a barrel (Brent has averaged almost $55 so far this year, versus about $42 in all of 2020).
  • By 2025, reductions in operating expenses and cash flow from new projects are projected to reduce that breakeven to more like $35 a barrel, with capex of more like $20 to $25 billion supported by Brent at $45-$50. 
  • The dividend yield has been fluctuating between 9.5%, was below 7.3% in the past few months. Like all oil majors Exxon needs oil to move higher;

Exxon 4 2020 Capital Allocation

Exxon 4 2020 Permian Performance

The company’s new focus on carbon capture energy-transition technologies is in Exxon’s world view of rising demand for oil. Exxon says that carbon capture “mitigates emissions at an affordable cost.” All depends what is affordabe of course. 

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

Exxon's focus on carbon capture still speaks to a mindset geared to higher oil demand, leaving Exxon vulnerable if this doesn't pick up.  There has been an surge of investment in other transition technologies such as electric vehicles, with the Tesla the poster child here. Old economy stalwarhas been right that lower investment in oil supply is fueling a sustained increase in prices, then its focus on resilience at lower prices will pay dividends in the near term. What is next in Exxon shift is the key for the long term.

Upstream

Downstream

Chemical

The Portfolio

  • During Q4, production volumes in the Permian averaged 418,000 oil-equivalent barrels per day, an increase of 42 percent from the prior year.
  • Full-year 2020 production averaged 367,000 oil-equivalent barrels per day. Focus remains on lowering overall development costs and increasing recovery through efficiency gains and technology applications.

Full-year 2020 drilling and completion costs were more than 25 percent lower than 2019. Over the same period, drilling rates (lateral feet per day) improved more than 20 percent and fracturing rates (stages per day) improved more than 30 percent.

ExxonMobil continued to progress major deepwater development in Guyana. Exploration, appraisal, and development drilling continues across four rigs with plans to add additional rigs in the first half of 2021. The Liza Phase 1 development, utilizing the Liza Destiny floating production, storage, and offloading vessel (FPSO), is producing at capacity of 120,000 gross barrels of oil per day.

The Liza Unity FPSO, which will be deployed for the second phase of Liza development and will have a gross production capacity of 220,000 barrels of oil per day, is under construction and is expected to start production in 2022. Payara, the third major phase of development, which was fully funded in 2020, will also have a gross production capacity of 220,000 barrels of oil per day and is expected to start up in 2024.

Outlook

Management Perspectives on Forward Plans For 2021 on

  • Additional annual structural operating expense reductions of $3 billion expected by 2023, resulting in total annual structural reductions of $6 billion versus 2019
  • Cash flow this year expected to cover capex and maintain dividend and strong balance sheet.
  • Assumptions include Brent prices of $50 per barrel and lowest annual Downstream and Chemical margins during 2010-2019; portfolio flexibility enables further adjustments
  • ExxonMobil Low Carbon Solutions business created and new independent director elected

 

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, Blooomberg

Live From The Pit 

Log in to comment
Discuss this article in the forums (1 replies).