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Energy giant Exxon Mobil (XOMFree Exxon Mobil Stock Report) has reported first-quarter 2014 earnings of $2.10 a share, versus $2.12 in the year-earlier quarter and our estimate of $1.90. Although the comparison from 12 months ago was flat, it was impressive that Exxon still generated $9.1 billion in profits, making it a veritable cash machine. The results topped the investment community's expectations, as well. The stock slipped on the report, however, possibly because of the downbeat tone to drilling operations (see below).

Strong performance in the upstream, or the oil and natural gas production segment, supported Exxon's bottom line. The company is enjoying higher natural gas prices as a result of depleted inventories of the fuel stateside following last winter's unusually cold temperatures. Domestic natural gas prices that are in a higher range ought to provide a tailwind for earnings in the upcoming quarters. Volumes pumped were not impressive, though, and the production of crude oil and natural gas fell 2% and 9%, respectively, for a combined drop of 5.6%. The expiration of an oil concession in Abu Dhabi and reduced demand for natural gas in Europe, where the winter was mild, hurt totals.

Despite the downbeat tone to drilling operations, Exxon has a full plate of projects coming on stream in the next few years that offer the promise of modestly higher production. That prospect appears to be keeping investors from getting too discouraged by the seeming lack of progress in recent results.

Downstream, refining profits fell notably on weaker refining margins, even as sales of petroleum products rose slightly. Earnings from the chemicals manufacturing segment also pulled back moderately on narrower margins.

Perhaps the quarter's most striking feature was a more-than-25% decline in capital and exploration expenditures. The company had earlier signaled that it would pull back on the ever-higher spending that had become a regular practice in recent years. The pause provided an opportunity to reduce debt somewhat.

Elsewhere, Exxon repurchased $3 billion worth of stock to reduce the number of shares outstanding. The company has indicated that it expects to buy back about the same amount of stock in the current quarter. We figure a hike in the quarterly dividend of around 5%, or better, is also a reasonable expectation.

For now, we are maintaining our full-year earnings estimate of $8.00 a share for Exxon Mobil in 2014. The blue-chip stock retains its appeal for conservative investors seeking a weighting in energy.

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 2013 was as follows: crude oil, 2.2 million barrels (+1% vs. ’12); natural gas, 11.8 billion cubic feet (-4% vs. ’12). Reserves as of 12/31/13 were 25.2 billion barrels of oil equivalent, 53% oil, and 47% gas. The reserve life at current production rates is about 16 years. The 10-year average reserve replacement rate is 120%. The daily refinery runs in 2013 were as follows: 4.6 million barrels (-9% vs. ’12); product sales, 5.9 million barrels (-5% vs. ’12); chemical sales, 24.1 million tons (flat vs. ’12).

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