Oil giant Exxon Mobil (XOMFree Analyst Report) has reported third-quarter earnings per share of $1.44, in line with our estimate of $1.45 and well above the $0.98 posted a year earlier. Profits were helped by higher crude oil and natural gas price realizations, improved refining margins, and reasonably good chemicals results. Prior hedges put in place by recently acquired XTO Energy may have helped push up gas price realizations, which have otherwise been soft recently. Excess production from shale rock formations being developed by the industry has pressured spot prices for the fuel.

The company turned in a strong performance in the field, seeing its combined oil and gas production rise 20%. Most of the increase came from the natural gas side, where additional unconventional gas volumes in the United States resulting from the XTO purchase and project ramp-ups in Qatar drove results. The company was no slouch on the oil side, either, with liquids production advancing 4%. Most of the jump in corporate profits came from the oil and gas production segment, particularly operations overseas, where Exxon conducts most of its business.

Downstream earnings did very well, too, rising 39% from the 2009 quarter, although they represent a smaller piece of the pie. Higher industry refining margins, partly offset by lower marketing margins, provided the bulk of the strength. A 4% rise in petroleum product sales indicated higher demand. Chemicals earnings also benefited from improved volume and margins, with the start-up of the Fujian facility in China boosting results.

Good news on the profit front is allowing Exxon to keep up a healthy pace of share repurchases. The company bought back 54 million shares for $3.3 billion in the third quarter and plans to purchase $5.0 billion for its treasury in the fourth quarter. Earnings-wise, we are maintaining our per-share estimates of $5.90 and $6.50 for 2010 and 2011, respectively.

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 positions in any of the companies mentioned.