ExxonMobil 1Q earning down 46% year-over-year

ExxonMobil Corp. reported first-quarter earnings of $4.9 billion, down from $9.1 billion during first-quarter 2014 due in part by upstream losses in the US. The total, however, exceeded analyst expectations.

Global upstream earnings were $2.9 billion in the first quarter, down $4.9 billion from first-quarter 2014. Lower liquids and gas realizations decreased earnings by $5.5 billion, while higher volumes and mix effects increased earnings by $340 million, reflecting growth from new developments. All other items, including favorable tax effects, increased earnings by $250 million.

The company’s US upstream operations, meanwhile, recorded a loss of $52 million, down $1.3 billion from first-quarter 2014. Non-US upstream earnings were $2.9 billion, down $3.6 billion from the prior year.

UK tax reform had a “$200-million positive impact on earnings,” said Jeffrey J. Woodbury, ExxonMobil vice-president of investor relations and secretary, during the company’s earnings call on Apr. 30. UK Chancellor of the Exchequer George Osborne announced during his fiscal speech in December that the supplemental charge rate would be cut to 30% from 32% (OGJ Online, Dec. 3, 2014).

Capital and exploration expenditures totaled $7.7 billion, down 9% from first-quarter 2014.

“Across our spend we are actively engaged with our service providers” in an effort to reduce costs, Woodbury said, adding that drilling and related services have been most responsive to the current environment. “We are very well poised that when we get into a downcycle like this that we can capture additional savings,” he said, noting that the company can still invest in important projects to capture value.

Cash flow from operations and asset sales was $8.5 billion, including proceeds associated with asset sales of $484 million. “We keep very alert to opportunities on the horizon for acquisitions,” Woodbury responded when asked about M&A activity going forward.

Global production up 2%

The company during the quarter produced 4.2 million boe/d, an increase of 97,000 boe/d over first-quarter 2014. Liquids production totaled 2.3 million b/d, up 129,000 b/d, while natural gas production was 11.8 bcfd, down 188 MMcfd from 2014.

The 2.3% overall rise is a result of new developments in Papua New Guinea, Canada, Angola, Indonesia, and US onshore liquids plays. Field decline and maintenance impacts were mostly offset by higher entitlement volumes, the company says.

“Broadly speaking in the three key plays in US unconventional we are running just south of 40 rigs,” he said, adding that the company’s rig count is trending downward due to output efficiency. ExxonMobil subsidiary XTO Energy Inc. most notably holds acreage in the Permian basin, and Bakken and Eagle Ford shale plays.

As for supply and demand, “there are still a lot of unknowns” for the rest of the year, Woodbury said, including how unconventional production will respond to shrinking rig counts.

Despite low natural gas prices, he also sees “a real opportunity in the US to commercialize this gas if we can remove the barriers before us,” he stated, referring to delayed permitting. He believes increased export options would improve the US economy. ExxonMobil and Qatar Petroleum International share a stake in Golden Pass LNG in Sabine Pass, Tex., where a $10-billion project is under way to convert the LNG regasification terminal into an export terminal (OGJ Online, July 31, 2014).

As for Russia, Woodbury said the company is complying with sanctions but enjoys a mutually beneficial relationship with its partners in the country. He noted sanctions don’t impact Sakhalin-1 project’s Arkutun-Dagi field, where production launched during the quarter (OGJ Online, Jan. 19, 2015).

Downstream earnings up

Downstream earnings were $1.7 billion, up $854 million from first-quarter 2014. Stronger margins increased earnings by $1 billion, while volume and mix effects increased earnings by $70 million. All other items, primarily higher maintenance expense, decreased earnings by $260 million. Petroleum product sales of 5.8 million b/d were flat with the prior year’s first quarter.

Earnings from the US downstream were $567 million, down $56 million from first-quarter 2014. Non-US downstream earnings of $1.1 billion were $910 million higher than last year.

Chemical earnings of $982 million were $65 million lower than first-quarter 2014. Improved margins increased earnings by $240 million, while favorable volume mix effects increased earnings by $30 million. All other items, primarily unfavorable foreign exchange effects, decreased earnings by $340 million, ExxonMobil says.

Woodbury said ExxonMobil expects global chemical demand to expand greater than global GDP by 1.5%.

Contact Matt Zborowski at matthewz@ogjonline.com.

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