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Dow 30 Earnings: Exxon Mobil - Fourth Quarter 2011
Energy giant and Dow-30 component Exxon Mobil (XOM – Free Exxon Mobil Stock Report) has reported its results for the fourth quarter. The company earned $1.97 a share in the term, below our $2.05 estimate, but ahead of the prior-year figure of $1.85. The advance was fueled by higher profits from Exxon's overseas oil and gas operations, which made up for lower upstream profits domestically and weakness in refining and chemicals. For 2011, the company earned $41 billion, or $8.42 a share, which marked a 35% improvement from the previous year. It was the company's second most profitable year ever, though results were partly aided by asset sales. Nevertheless, Exxon stock retreated somewhat following the earnings release, likely due to lingering investor concerns over the state of the broader economy, which was underscored by a weaker reading on consumer confidence.
Exxon's good overall showing was helped by higher price realizations. Oil and natural gas production volumes rose only slightly (+1%) on a full-year basis, and tailed off toward yearend, falling 9% in the fourth quarter. That was largely due to the impact of OPEC quota levels and divestments. Exxon has been spending mightily on capital and exploration projects, but that so far hasn't moved the needle much in terms higher production. Part of the difficulty is because of relatively rapid decline rates at mature fields.
There was a similar type of trend in oil refining and marketing, with higher profits earlier in the year than at the end. Downstream earnings fell in the fourth quarter as a result of weaker refining margins. Notably, the profit surge that had occurred in the United States refining business came to a halt. That was probably attributable to narrower spreads between prices for domestic and international grade oil, as some other refiners had indicated. Earnings from chemicals dropped in both the fourth quarter and the full year, on lower margins and unfavorable tax effects. As for 2012, we are, for now, maintaining our estimate for share earnings at $8.50.
Share repurchases continue to be a highlight. The company bought back $22 billion worth of stock in 2011, reducing the net number of shares outstanding by 245 million. Exxon's consistency with regard to share repurchases is noteworthy.
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.