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Dow 30 Earnings: Exxon Mobil - Fourth Quarter 2010
Exxon Mobil (XOM – Free Exxon Mobil Stock Report), the world’s largest publicly traded oil company, has posted surprisingly strong December-period earnings of $1.85 a share. Indeed, the figure handily beat our estimate of $1.53 and the year-earlier tally of $1.27. Profits surged across the board on higher crude oil and natural gas price realizations, improved refining margins, and a much better showing from the chemicals unit. On a full-year basis, share net rose 56% from 2009, to $6.22.
Sharply higher (19%) combined oil and gas production helped lift upstream results. Most of the increase was on the natural gas side of the equation. The company continues to benefit from its 2010 acquisition of XTO Energy, as well as significant investments in Qatar. Those factors also helped to lift oil production by 6% in the quarter. In 2011, this line should enjoy the support of higher average oil prices and another, if more subdued, volume advance.
Downstream, rising demand for petroleum products has created a notably more favorable environment at the refining and marketing segment. Quarterly and full-year losses in the United States turned into gains at the end of 2010, while non-U.S. profitability rose by a very healthy 60%. This segment clearly has more momentum behind it than it has in a while, with demand for gasoline and diesel fuel rising as global GDP advances. The economic recovery has also fueled a sizable widening in chemicals margins, pushing up the division’s profits 49% in the quarter, while full-year chemicals profits more than doubled. Further advances may not be as spectacular, though, now that the segment has come off its low point.
The company repurchased $13 billion in stock in 2010, reducing the number of shares outstanding by 199 million. We see no letup in sight for the aggressive buyback plan, which is Exxon’s calling card, and a nice feature for investors. High oil prices should ensure that there is more cash than needed to fund development plans.
Exxon Mobil stock has been strong in recent months as oil prices have moved up on rising expectations for business growth, particularly in emerging markets. We now estimate 2011 earnings will be in the $7.00-a-share range. Despite their recent run, the shares still have some appeal for conservative investors with a long-term horizon.
About The Company: Exxon Mobil Corp. is the largest publicly traded oil company in the world. It also owns 69.6% of Imperial Oil (Canada). Daily production in 2009 was as follows: crude oil, 2.4 million barrels (flat vs. ’08); natural gas, 9.3 billion cubic feet (+3% vs. ’08). The average realized 2009 prices in the U.S. were: oil, $55.54 per barrel; natural gas, $3.85 per mill. cubic feet. Reserves as of 12/31/09 were 23.3 billion barrels of oil equivalent, 51% oil, and 49% gas. The reserve life at current production rates is about 15.7 years. The 10-year average reserve replacement rate is 112%. The daily refinery runs in 2009 were as follows: 5.4 million barrels (flat vs. ’08); product sales, 6.4 million barrels (-5% vs. ’08); chemical sales, 25.0 million tons.
At the time of this article’s writing, the author did not have any positions in any of the companies mentioned.