U.S. energy behemoth ExxonMobil Corp.'s (XOM) first quarter earnings shot up more than 69% year over year (from $6.3 billion to $10.7 billion), driven by higher commodity price realizations, improved refinery margins and solid chemical contributions.
The world's largest publicly traded oil company posted earnings of $2.14 per share, beating the Zacks Consensus Estimate of $2.05 and substantially ahead of the year-earlier earnings of $1.33. Total revenue in the quarter increased 26.3% year over year to $114.0 billion, easily surpassing the Zacks Consensus Estimate of $97.5 billion.
Operational Performance
Upstream: Upstream segment earnings during the quarter were $8.7 billion, up 49.2% from the $5.8 billion earned in the year-ago period. This primarily reflects higher crude oil/natural gas realizations, asset management activity and lower expenses, partially offset by production mix and volume effects.
The Irving, Texas-based oil and natural-gas powerhouse’s production averaged 4.8 million oil-equivalent barrels per day (MMBOE/d), up 10.5% year over year. When adjusted for the impact of entitlement volumes and OPEC quota restrictions, production was up about 12%.
Downstream: In the Downstream segment, ExxonMobil recorded profit of $1.1 billion as against earnings of just $37 million in the year-ago period. The improvement reflects higher industry refining margins, positive volume and mix effects, and favorable foreign exchange impacts.
ExxonMobil's refinery throughput averaged 5.18 million barrels per day, almost unchanged from the year-earlier level. Total refined product sales of 6.3 million barrels per day were up 1.2% year over year.
Chemical: This unit contributed $1.5 billion to the company’s profits, an increase of 21.4% year-over-year, mainly attributable to improved margins.
Cash Flow
During the quarter, ExxonMobil generated cash flow from operations and asset sales of $18.2 billion, returned more than $7 billion to shareholders through dividends/share purchases and spent $7.8 billion on capital projects.
Outlook
ExxonMobil currently retains a Zacks #3 Rank (short-term 'Hold' rating).
With the economic rebound showing signs of strengthening and oil prices rallying, we expect integrated oil companies such as ExxonMobil to continue to accelerate revenue and earnings growth over the next few quarters. Apart from the economic recovery, the company’s recent results have also benefited from its operational and production efficiency and contributions from growth programs.
ExxonMobil – the largest U.S. oil firm by market value ahead of Chevron Corp. (CVX) – is the best-run integrated oil company in the world given its track record of superior return on capital employed. It has long been a core holding for investors seeking a defensive name with continued dividend growth.
However, as access to new energy resources becomes more difficult, ExxonMobil, like most of its peers, will face headwinds to replace its reserve. Given its large base, achieving growth in oil and natural gas production has been a challenge with the company over the last many years. With the established oil producing regions of Europe and North America well beyond their prime, the search for growth has pushed ExxonMobil into riskier regions.
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