ExxonMobil Corp.’s (XOM) fourth quarter earnings shot up 53% year over year, driven by higher commodity price realizations, improved refinery margins and solid chemical contributions.
The world’s largest publicly traded oil company posted earnings of $1.85 per share, substantially beating the Zacks Consensus Estimate of $1.62 and year-earlier earnings of $1.27. Full-year 2010 earnings were up 55% from the year-earlier level at $6.22 per share, well above the Zacks Consensus Estimate of $5.98.
Total revenue in the quarter increased more than 17% year over year to $105.2 billion, easily surpassing the Zacks Consensus Estimate of $93.6 billion. Full-year revenue came in at $383.2 billion (up more than 23% year over year), ahead of the Zacks Consensus Estimate of $371.9 billion.
Recently, ConocoPhillips (COP) and Chevron Corp. (CVX) also beat our estimates on the back of strong commodity prices and improved U.S. refining margins. All these emphasize a strong market trend.
Importantly, Exxon has returned $19 billion to shareholders as dividends and share buybacks in 2010.
Operational Performance
The improved production and increased oil price realizations led to a 53% hike in earnings from the year-earlier quarter to reach $9.25 billion. Upstream earnings were about 29% higher from the year-earlier quarter at $7.48 billion.
The production of oil and natural gas averaged 4.97 million oil equivalent barrels per day (50.9% liquids), up nearly 19% year over year. When adjusted for the impact of entitlement volumes and OPEC quota restrictions, production was up about 18%.
Exxon’s refinery throughput averaged 5.30 million barrels per day, down 1.5% from the year-earlier level. Total refined product sales of 6.56 million barrels per day were up 1% year over year. Total product sales in the Chemicals business segment decreased 4.9% year over year to $6.35 billion.
Total Downstream earnings in the quarter were $1.15 billion, including $226 million from domestic operations. Chemical earnings were $1.07 billion, up 49% from the year-earlier earnings.
Cash flow from operations and asset sales totaled $14.7 billion in the reported quarter. Capital expenditures totaled $10.1 billion, up 22% year over year.
Outlook
While production volumes in the reported quarter increased significantly, we believe that it will further augment next year through the joint venture agreement that was signed with Qatar Petroleum to progress the Barzan Project. Further, Fayetteville shale assets of Petrohawk Energy as well as expansion of the carbon dioxide capture plant at LaBarge facility are also expected to boost future volume growth.
ExxonMobil is the best-run integrated oil company in the world given its track record of superior return on capital employed. As the largest publicly traded oil company, ExxonMobil has long been a core holding for investors seeking a defensive name with continued dividend growth. However, as access to new energy resources becomes more difficult, ExxonMobil, like most of its peers, will face headwinds to replace its reserve.
The company holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating. We also maintained our long-term Neutral recommendation on the stock.
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