Oil giant and Dow-30 component Exxon Mobil (XOM – Free Exxon Mobil Stock Report) has reported third-quarter share earnings of $2.13, up from $1.44 in the comparable 2010 period and above our $1.95 estimate. The gain was mainly attributable to higher crude oil and natural gas price realizations, with an assist from improved refining margins. The shares were flat in morning trading in a strongly higher stock market.

As usual, the upstream division led the way, with increased profits from non-U.S. oil and gas pumping operations accounting for 90% of the quarterly advance. Upstream earnings now represent more than three-quarters of the corporate total.

Exxon Mobil wasn't able to put up impressive numbers in terms of the amount of volume pumped though, despite significant spending initiatives of late. Combined oil and gas production dipped 4% in the quarter, due to the effects of OPEC quotas, variation in entitlement volumes, divestitures, and natural field declines. That was in spite of gains in production in Iraq, Russia, and Qatar. Nevertheless, the full-year picture tells a brighter story. Overall, production was up 5% for the first nine months of 2011, led by rising natural gas output from unconventional fields stateside and project ramp-ups in Qatar.

Downstream, earnings were helped by improved refining margins in the United States. Product prices for gasoline, diesel fuel, and heating oil remain notably higher than a year earlier, on a percentage basis, than crude oil. The prospect that refining margins will remain strong offers promise for the bottom line as 2011 winds down. However, a modest, flat-to-downward trend in chemicals volumes provides somewhat of an offset.

During the quarter, Exxon continued to forge ahead with its share repurchase plan, buying back an impressive 72 million shares, for $5.5 billion. So far this year, the company has bought back $16.6 billion worth of stock, reducing the number of shares outstanding by 209 million, or 4% of the total at the end of 2010.

At this time, we are raising our 2011 earnings-per-share estimate by $0.25, to $8.55, although it appears that 2012 profits may flatten out as global economic growth slows.

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 2010 was as follows: crude oil, 2.4 million barrels (+1% vs. ’09); natural gas, 12.1 billion cubic feet (+31% vs. ’09). The average realized 2010 prices in the U.S. were: oil, $55.54 per barrel; natural gas, $3.85 per mill. cubic feet. Reserves as of 12/31/10 were 24.8 billion barrels of oil equivalent, 47% oil, and 53% gas. The reserve life at current production rates is about 15 years. The 10-year average reserve replacement rate is 121%. The daily refinery runs in 2010 were as follows: 5.3 million barrels (-2% vs. ’09); product sales, 6.4 million barrels (flat vs. ’09); chemical sales, 25.9 million tons.


At the time of this article’s writing, the author did not have positions in any of the companies mentioned.