U.S. energy behemoth ExxonMobil Corp. (XOM) reported disappointing first quarter 2012 results on lower production volume. The company reported earnings of $2.00 per share, failing to meet the Zacks Consensus Estimate of $2.11. The results also fell 7% from the year-ago level of $2.14 a share.
However, total revenue in the quarter grew almost 9% year over year to $124.1 billion and comfortably surpassed the Zacks Consensus Estimate of $121.6 billion, thanks to steep oil prices.
Operational Performance
Upstream: Quarterly earnings of the segment were $7.8 billion, down 10% from $8.7 billion a year ago. The underperformance primarily reflects lower sales volumes, partially offset by higher crude oil/natural gas realizations.
Production averaged 4.553 million barrels of oil-equivalent per day (MMBOE/d) in the quarter, down more than 5% year over year. When adjusted for the impact of entitlement volumes and OPEC quota restrictions, production decreased 1%.
Of the total production, liquid comprised nearly 49% and the rest was natural gas. Liquid production experienced a downfall of 7.7% year over year to 2.214 million barrels per day, due to field decline. This was partially offset by the stepping up of Angola and Iraq ventures, with lower downtime.
Again, field decline and asset sale led to the natural gas production decrease of 3.4% on an annualized basis.
Downstream: The segment recorded profit of $1.6 billion in the first quarter of 2012 as against $1.1 billion in the year-ago period, attributable to asset sale gains as well as volume mix. These were partly mitigated by weak margins.
ExxonMobil’s refinery throughput averaged 5.3 million barrels per day (MMBPD), up from the year-earlier level of 5.2 MMBPD.
Chemical: This unit contributed $701 million to the company’s profits, down from the year-earlier level of $1.5 billion. The underperformance was mainly due to poor margins, higher planned maintenance and the absence of favorable tax item.
Financials
During the quarter, ExxonMobil generated cash flow from operations and asset sales of $21.8 billion and returned more than $7 billion to shareholders through dividends/share purchases. Capital spending during the quarter was $8.8 billion.
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 of 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 the 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 in replacing 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.
ExxonMobil’s competitor Chevron Corp. (CVX) is scheduled to report its first quarter 2012 results on April 27, 2012.
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