Value Line is regarded as the best independent research available. More than just recommendations, Value Line provides the rationale behind its picks for greater understanding.
- Don D., California
Dow-30 Earnings: Exxon Mobil - Third Quarter 2012
Petroleum giant Exxon Mobil (XOM - Free Exxon Mobil Stock Report) has reported that it earned $2.09 a share in the third quarter of 2012, down slightly from the $2.13 a share in the year-earlier period, and in line with our estimate of $2.05 a share. Net profit was actually down a more noticeable 7%, mostly because of a weaker performance in the pumping segment. However, the company's aggressive share repurchase program shored up per-share results.
One of the quarter's more significant aspects was a shift in the makeup of earnings, with the refining and marketing segment picking up most of the slack from the oil and gas division. Profits from producing oil and gas fell, owing to lower volume and unfavorable tax items and foreign exchange effects. Notably, combined oil and gas output dropped 7.5% from the same period in 2011, with the oil component slipping 3.1%. That is despite record project development spending on Exxon's part. Still, crude oil quotations that were down somewhat, year over year, contributed to the relatively poor showing in the production division. Natural gas price realizations were lower too, and likely inhibited production to a degree.
Nevertheless, strong refining margins largely made up for weakness elsewhere, but this was more of an industrywide trend, rather than anything the company did on its own. Indeed, petroleum product sales were comparatively flat, excluding divestments and a restructuring of the business in Japan. Meanwhile, narrower margins pushed down earnings from chemicals manufacturing.
Overall, it was a healthy quarter for Exxon, even if share net was flattish, with the company earning a very substantial $9.6 billion. That type of cash-generating capability enabled the oil giant to continue its impressive share-repurchase program. The company spent $5.1 billion to buy back 58 million shares of common stock in the quarter. A hefty amount of repurchases going forward seems likely, too.
At this time, we are making no changes to our estimates. We look for Exxon Mobil to earn $7.95 a share in 2012 and $8.55 in 2013. The top-quality stock retains a measure of appeal for long-term investors in the energy sector.
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.