ExxonMobil Corp. (XOM) reported better-than-expected third quarter results driven by higher commodity price realizations, improved refinery margins and solid chemical contributions. Notably, this was the first full quarter that includes the natural-gas company XTO Energy.
The world’s largest publicly traded oil company posted earnings of $1.44 per share, compared with the Zacks Consensus Estimate of $1.39 and year-earlier earnings of 98 cents.
Total revenue in the quarter increased nearly 16% year over year to $95.3 billion, compared with the Zacks Consensus Estimate of $99.9 billion.
Royal Dutch Shell Plc (RDS.A) also beat our forecasts with higher oil and gas prices. Yesterday, ConocoPhillips (COP) beat our estimate as well on the back of strong commodity prices and improved U.S.refining margins. All these emphasize a strong market trend.
It remains to be seen how Chevron (CVX) reacts with this favorable market trend in its third quarter results, scheduled tomorrow.
Importantly, Exxon has returned $5 billion to shareholders as dividends and share buybacks.
Operational Performance
The improved production and increased oil price realizations caused a 55% hike in earnings from the year-earlier quarter to reach $7.35 billion. Upstream earnings were nearly four fold higher from the year-earlier quarter $5.47 billion.
The production of oil and natural gas averaged 4.45 million oil-equivalent barrels per day (54.4% liquids), up 20.5% year over year. When adjusted for the impact of entitlement volumes and OPEC quota restrictions, production was up about 20%.
Exxon’s refinery throughput averaged 5.36 million barrels per day, almost flat with the year-earlier level. Total refined product sales of 6.57 million barrels per day were up 4.3% year over year. Total product sales in the Chemicals business segment increased 3.2% year over year to $6.56 billion.
Total Downstream earnings in the quarter were $1.16 billion, including $164 million from domestic operations. Chemical earnings were $1.23 billion, up 40.3% than the year-earlier earnings.
Cash flow from operations and asset sales totaled $13.9 billion in the reported quarter. Capital expenditures totaled $8.8 billion, up 35% year over year.
Outlook
While production volumes in the reported quarter increased significantly, we believe that it will further augment in the next year as the second field in the Sakhalin-1 Project, Russiacame online last month. This field is expected to add approximately 11 million barrels of oil to the total oil production of Sakhalin-1 in 2011. The Sakhalin-1 Project is treated as one of Exxon’s attractive investments in Russia.
ExxonMobil is the best-run integrated oil company in the world given its track record of superior return on capital employed. However, with its capital budget, which is expected to be about $30 billion per year for at least next few years, we do not foresee the company as having enough cash flow available to raise its share repurchase expenditure.
We are currently Neutral on ExxonMobil shares with a Zacks #3 Rank (Hold).
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
Zacks Investment Research
