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Earnings Preview: Exxon Mobil to report 1Q results

Jonathan Fahey, AP Energy Writer

NEW YORK (AP) -- Exxon Mobil Corp. is expected to report a smaller first quarter net income on lower production when it reports results Thursday.

Global oil prices remained high during the quarter, which will help propel Exxon's results. And Exxon has been buying back shares from investors, which will boost earnings per share. But Exxon has reduced production of natural gas compared after prices fell to their lowest level in a decade last year.

Natural gas prices in the U.S. have rebounded somewhat in recent weeks, but the bulk of the rise occurred in April, after the end of the first quarter.

Exxon expanded its U.S. natural gas operations dramatically when it bought XTO Energy in 2009 for $31 billion. But low natural gas prices since then have held back Exxon's results.

As it cuts natural gas production, Exxon is trying to increase its oil output. Its Kearl project in the Canadian oil sands began production in the first quarter, and Exxon is expecting to boost production in its holdings in Oklahoma, Texas and North Dakota.

Exxon said in a meeting with investors in March that it expects natural gas production to decline 5 percent this year, while production of oil and other liquid hydrocarbons will grow 2 percent. Total production will fall 1 percent this year, the company said.

WHAT TO WATCH FOR: Investors will want to see whether Exxon is making progress growing its oil production. Exxon's view of the global economy will also be worth noting. Exxon is the world's biggest refiner, and it produces gasoline, diesel, jet fuel and petrochemicals around the globe. When economies grow, consumption of these products rises. In March, the company told investors that near-term economic growth remains "sluggish."

WHY IT MATTERS: ExxonMobil is the world's most valuable company, as measured by market capitalization. Apple Inc. had been the biggest company for several months, but a dramatic slide in Apple's share price has allowed Exxon to regain the top spot.

WHAT'S EXPECTED: Analysts expect Exxon to earn $9 billion, or $2.04 per share, on average, according to FactSet.

LAST YEAR'S QUARTER: Exxon earned $9.45 billion, or $2 per share, on revenue of $124 billion in the first three months of 2012.