Resilient Exxon Beats on Earnings

Zacks

A resilient ExxonMobil Corporation (XOM) posted third-quarter 2013 earnings of $1.79 per share, beating the Zacks Consensus Estimate of $1.77. The quarterly beat came at a time when a sharp drop in refinery utilization rates has hurt the fortunes of refiners. Exxon’s outperformance was backed by higher liquid and natural gas prices. However, earnings per share fell 14.4% from last year's $2.09.

Total revenue in the quarter decreased 2.4% year over year to $112.4 billion, and also came below the Zacks Consensus Estimate of $115.1 billion.

Operational Performance

Upstream: Quarterly earnings for the segment were $6.7 billion, up 12.4% from $6.0 billion a year ago. The improvement was primarily aided by higher liquid and natural gas realizations, which were partly mitigated by higher operating expenses.

Production averaged 4.018 million barrels of oil-equivalent per day (MMBOE/d), up 1.5% year over year. When adjusted for the impact of entitlement volumes and OPEC quota restrictions, production increased 2.7%, with liquids volumes up 5.3%.

Liquid production increased 5.3% year over year to 2.199 million barrels per day on lower downtime and project ramp-up in Canada and Nigeria. This was partially offset by field decline.

However, the field decline resulted in the natural gas production fall of 0.3% on an annualized basis.

Downstream: The segment recorded profit of $592 million in the third quarter against $2.6 billion in the year-ago quarter, mainly due to weaker refining margins.

ExxonMobil's refinery throughput averaged 4.8 million barrels per day (:MMBPD), down 1.7% from the year-earlier level of 4.9 MMBPD.

Chemical: This unit contributed approximately $1.0 billion to the company’s profits, up 22.9% from the year-earlier level of $790 million. The upside was mainly due to higher product sales.

Financials

During the quarter, ExxonMobil generated cash flow from operations and asset sales of $13.6 billion. The company returned more than $5.8 billion to shareholders through dividends/share purchases. Capital spending increased nearly 15% year over year to $10.5 billion.

Our Take

We believe that ExxonMobil is the world’s best-run integrated oil company, based on 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.

ExxonMobil’s strength is in its balanced operations, strong financial flexibility and steady improvement in efficiency and cost control. The company’s efforts to build an unconventional resource portfolio both in North America and overseas are aimed at increasing production through wider exposure to large energy resources with long reserve life and low field declines. However, we are skeptical about the company’s near-term performance due to its muddled refining fortunes.

ExxonMobil currently has a Zacks Rank #3 (Hold). However, there are certain Zacks Ranked #1 stocks – Legacy Reserves Lp (LGCY), Matador Resources Co. (MTDR) and Northern Oil and Gas, Inc. (NOG) – that appear more rewarding in the short term.

Read the Full Research Report on XOM
Read the Full Research Report on MTDR
Read the Full Research Report on LGCY
Read the Full Research Report on NOG


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