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Exxon (XOM), Chevron (CVX) Earnings Shine On Refining Margins

 February 01, 2013 09:38 AM
 


(By Mani) The quarterly earnings of oil giants Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) handily beat Wall Street estimates as cheaper U.S. oil boosted refining margins.

Oil companies are reporting results amid increasing domestic oil and gas production due to new technology being deployed in U.S. shale fields, and the continuing Brent/WTI spread leading to cheaper oil.

Irving, Texas-based Exxon reported weak upstream operations due to lower crude oil production, but made up the lost earnings via strong downstream results, while Chevron posted higher earnings in both upstream and downstream segments.

Exxon's fourth quarter earnings increased 6 percent to $9.95 billion, or $2.20 a share, an upside of 20 cents to the consensus view of $2.00 a share. In the same quarter last year, Exxon earned $9.4 billion, or $1.97 a share.

Quarterly revenue for Exxon, the world's largest publicly traded oil company, fell 5.3 percent to $115.17 billion. Wall Street expected revenue of $115.22 billion, according to analysts polled by Thomson Reuters.

Exxon's upstream earnings fell 12 percent to $7.76 billion on lower liquids realizations. On an oil-equivalent basis, production dropped 5.2 percent. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production decreased 2.1 percent.

Liquids production totaled 2,203 kbd (thousands of barrels per day), down 47 kbd from the fourth quarter of 2011. Fourth quarter natural gas production was 12,541 mcfd (millions of cubic feet per day), down 1,136 mcfd from 2011.

Downstream earnings of Exxon, a Dow component, more than quadrupled to $1.77 billion on stronger refining-driven margins, volume and mix effects. Chemical earnings surged 76 percent to $958 million on higher commodity margins.

Exxon said it would develop its behemoth drilling project of the coast of Newfoundland, Canada. The Hebron oil field is a $14 billion investment project of which Exxon and Chevron are the two largest partners with 36 and 27 percent, respectively.

The project might single-handedly resolve both companies upstream woes as the project is expected to recover more than 700 million barrels of oil and will be capable of churning out 150,000 barrels of oil per day from the gravity-based platform.

Meanwhile, Chevron reported fourth-quarter net income of $7.24 billion, or $3.70 a share, compared with $5.12 billion, or $2.58 a share in the 2011 fourth quarter. The latest results included a gain of $1.4 billion from an asset exchange.

Sales and other operating revenues in the fourth quarter 2012 were $56.25 billion, down from $58.03 billion in the year-ago period, mainly due to lower crude oil volumes. Total revenues and other income rose to $60.55 billion from $59.98 billion a year-ago.

Wall Street analysts expected earnings of $3.04 a share on revenue of $68.64 billion.

San Ramon, California-based Chevron's upstream earnings rose 19 percent to $6.86 billion. Worldwide net oil-equivalent production was 2.67 million barrels per day in the fourth quarter 2012, up from 2.64 million barrels per day in the 2011 fourth quarter.

In its downstream segment, Chevron swung to a profit of $925 million, compared to a loss of $61 million last year due to improved margins on refined products and higher earnings from the 50 percent-owned Chevron Phillips Chemical Company LLC.

Chevron's strong downstream results would have been better if there had not been an early-August fire at the refinery in Richmond, California that shut down the crude unit

Peer, ConocoPhillips (NYSE: COP) earned $1.43 billion or $1.16 per share, down from $3.39 billion or $2.56 per share in the year ago quarter. Excluding special items, adjusted earnings for the quarter were $1.76 billion or $1.43 per share, topping Street view of $1.42 per share. Total revenues and other income for the quarter rose 2 percent to $16.37 billion. Analysts had a consensus estimate of $13.31 billion.

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