Exxon Mobil Corporation (NYSE:XOM) came shy of its 2008 annual earnings by just $300 million. The U.S largest oil company posted FY12 earnings of $44.9 billion, as compared to an all time high for any company of $45.2 billion, which the Irving, Texas-based company posted in 2008. The reported earnings represented an increase of 9 percent year-over-year. The most recent quarter results did not disappoint either, as earnings grew by 6 percent, with the company posting $10 billion.
Notably, throughout 2012, gas prices rose to an average of $3.60 per gallon, but this still fell short of the peak of $4.114 reached in 2008. Perhaps this explains why the two periods racked posted earnings.
Illustratively, Exxon Mobil reported an EPS of $2.20, wiping out the consensus estimate of $2.00. However, according to a report published on Friday, February 1, Raymond James & Associates reckons that the company’s earnings included net proceeds realized from the sale of assets worth $600 million, and over $300 million LIFO gains on inventory. Interestingly, this represents Approximately $0.20 worth of EPS, which provided the premium exhibited on results versus the consensus estimate. The analysts also revealed that Exxon Mobil’s most recent quarter earnings tramped their estimate of $2.12 per share.
The company spent approximately $12.4 billion on capital investment during the quarter, while the total for the year stood at $39.8 billion, which also included $3 billion worth of acquisitions. Therefore, capital expenditure rose by 8 percent in 2012 year-over-year, from $36.7 billion reported in 2011.
The Upstream Miss
The upstream earnings production produced a modest miss compared to the analyst estimate posting $7.7 billion versus $8 billion. Exxon Mobil Corporation (NYSE:XOM)’s upstream production of 4,293 million barrels of oil equivalent per day (MBoe/d) was short 3 percent from Raymond James estimate, due to slowdown in European volumes, for the quarter.
The entire 2012 saw volumes decline by 6 percent. The main cause of the slowdown, according to the analysts, was Production Sharing Contracts (PSC) effects and asset sales, with less than half of the 6 percent being organic. Nonetheless, the analysts are modestly bullish for the current campaign with a forecast of 3 percent growth, as they anticipate a reverse role from the PSC.
The analysts also expect the Kearl oilsands project, which starts this current quarter (1Q13), to crystallize thereby ramping to 110 MBpd (gross ) later in the year. The analysts also wrote, “We also anticipate a small uptick in U.S. volumes (both liquids and gas), though this is more than offset by continued field declines in the North Sea. Looking ahead to 2014, we project flattish volumes; start-up of PNG LNG could provide some upside late in the year, but its contribution will not become meaningful until 2015”.
Downstream Blow-out
Exxon Mobil compensated on the miss from upstream production with a Downstream blow-out. The company’s downstream earnings blew out all the estimates by more than 60 percent. Raymond James analysts had predicted 41.1 billion earnings for Q4, but the company reported $1.8 billion, topping their prediction by $0.7 billion or 63 percent.
The analysts reckoned that the downstream helped refine profit margins for the Oil and Gas giant. According to the report, management revealed that runs of advantaged crudes in the Gulf Coast refining portfolio more than tripled over the past few years. Chemicals also were strong, with earnings of $958 million besting our $800 million.
Exxon Has The Financial Muscle Fund Drilling Against Low Gas Prices, but Competitors not so
Exxon Mobil will without a doubt run its drilling projects without a sweat as far as finances are concerned. However, this is not so for the likes of Chesapeake Energy Corporation (NYSE:CHK), a company which finds itself in a position where it must accelerate the disposal process to curb stock risk. Chesapeake energy’s cash flow is not impressive, despite having invested so much on “promising projects”.
On the other hand, Chevron Corporation (NYSE:CVX) also beat analyst estimates today, after it announced $3.70 earnings per share (EPS) for the previous quarter, beating the consensus estimate of $3.00 by $0.70. However, the company’s reported revenues of $60.55 billion for the quarter missed the analyst estimate of $66.81 billion. The earnings per share for the quarter were up from the previous year’s $2.58, while the quarterly revenue was up .9% year-over-year.
Raymond James recommendation on Exxon Mobil noted, “In the context of our far below-consensus oil price outlook for 2013 ($85/Bbl Brent, $65/Bbl WTI), Exxon is virtually the only one in the peer group that can fully fund the entire capital program and dividend payout , as we detailed on January 14 (“No Fiscal Cliff Here; Still an Appealing FCF Story Even at $85 Brent”). Also, contrary to recent market speculation, we view the current buyback pace ($5 billion per quarter) as sustainable, albeit with some incremental borrowing. Balancing the industry-leading free cash flow generation with the troubling pattern of declining production, we reiterate our Outperform rating”.
At the time of this writing, Exxon Mobil Corporation (NYSE:XOM)) stock was trading at 490.09 per share, up $0.12, or a 0.13 percent increase from Thursday’s closing price.
