U.S. energy behemoth ExxonMobil Corp. (XOM) posted mixed fourth quarter and full year 2011 results, reflecting new exploration opportunities and overseas project start-ups, partially offset by steeper operating costs and income taxes.

The company reported fourth quarter 2011 earnings of $1.97 per share, improving considerably from the year-earlier earnings of $1.85. However, the company’s earnings missed the Zacks Consensus Estimate of $2.01.

For the full year, earnings per share stood at $8.42, slightly below our projection of $8.46. However, full-year earnings compared favorably with the year-ago level of $6.22.

The company’s earnings increased 1.6% year over year to $9.4 billion in the quarter and shot up 34.8% to $41.1 billion for the full year. The year-over-year upside was mainly driven by higher oil and gas price realizations and improved refinery margins. Gains from asset disposals also contributed to the results.

Total revenue in the quarter grew 15.6% year over year to $121.6 billion, comfortably surpassing the Zacks Consensus Estimate of $110.4 billion.

ExxonMobil generated revenues of $486.4 billion in fiscal 2011, compared with $383.2 billion in 2010. The fiscal result also surpassed the Zacks Consensus Estimate of $470.1 billion.

Operational Performance

Upstream: Quarterly earnings of the segment were $8.8 billion, up substantially from the $7.5 billion a year ago. The growth primarily reflects higher crude oil/natural gas realizations, partially offset by production mix and volume effects.

Production averaged 4.5 million barrels of oil-equivalent per day (MMBOE/d) in the quarter, down 8.8% year over year. When adjusted for the impact of entitlement volumes and OPEC quota restrictions, production decreased 4%.

Downstream: The segment recorded profit of $425 million in the fourth quarter of 2011 as against $1.2 billion in the year-ago period, hurt by weak margins and negative volume mix effects.

During the quarter, ExxonMobil’s refinery throughput averaged 5.2 million barrels per day (MMBPD), down marginally from the year-earlier level of 5.3 MMBPD. Total refined product sales of 6.493 MMBPD were down slightly from the year-ago level of 6.555 MMBPD.

Chemical: This unit contributed $543 billion to the company’s profits, down 49.1% year over year. The underperformance was mainly due to lower sales volumes and poor margins.

Financials

During the quarter, ExxonMobil generated cash flow from operations and asset sales of $17.6 billion and returned more than $5 billion to shareholders through dividends/share purchases. Capital spending during the quarter was $10.0 billion.

Peer Comparison

ExxonMobil’s competitor Chevron Corp. (CVX) reported fourth-quarter 2011 earnings per share (excluding adjustments for foreign-currency effects) of $2.61, missing the Zacks Consensus Estimate of $2.86. Quarterly revenue of $59,985 million also failed to meet our projection of $74,431 million.

Our Take

ExxonMobil shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

We believe that ExxonMobil is the world’s best-run integrated oil company given its track record of superior return on capital employed. The company boasts diversified operations across the world with several new projects coming online through 2013.

Significant exploration successes — with key wells in the Gulf of Mexico (GoM), the Black Sea, Tanzania and Argentina — are believed to be major catalysts going forward. New volume additions are also expected from U.S., Canada, Kazakhstan, Nigeria, Australia, Russia, Angola and Iraq in the coming quarters.

However, as access to new energy resources becomes more difficult, ExxonMobil, like most of its peers, will face headwinds to replace its reserve. Given its large base, achieving growth in oil and natural gas production has been a challenge for the company over the last several years.

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