ExxonMobil's (XOM) Q4 Earnings Beat On Downstream Strength

Exxon Mobil Corporation (NYSE:XOM) reported strong fourth-quarter 2018 earnings despite weakness in crude prices. Robust downstream profits, owing to impressive margins from North American crude differentials, and ramped-up liquids production from the prolific Permian primarily supported the outperformances.

Investors cheered ExxonMobil’s quarterly earnings and the stock rallied more than 2% in pre-market trading.

The largest publicly-traded integrated energy company’s earnings per share of $1.51 — after adjusting non-recurring items — surpassed the Zacks Consensus Estimate of $1.08. The bottom line also improved from the year-earlier adjusted figure of 88 cents.

Total revenues of $71,895 million missed the Zacks Consensus Estimate of $74,177 million. However, the top line improved from $66,515 million recorded a year ago.

Operational Performance

Upstream: Quarterly adjusted earnings were recorded at $3.7 billion, up from $2.5 billion in the year-ago quarter. Higher seasonal demand, along with strengthening prices of natural gas & liquefied natural gas (LNG) primarily drove the upside. This was negated partially by weakening oil prices through the October-December quarter of 2018.

Total production averaged 4.010 million barrels of oil-equivalent per day (MMBOE/d), marginally higher than 3.991 MMBOE/d a year ago.

Liquid production increased year over year to 2.348 million barrels per day (MMB/D) from 2.251 MMB/D, thanks to ramped-up activities in the prolific Permian. However, natural gas production was 9.974 BCF/d (billions of cubic feet per day), down from 10.441 BCF/d in the year-ago quarter.

Downstream: The segment recorded profits of $2.7 billion, surged from $0.9 billion in the October-December quarter of 2017, thanks to strong margins from North American crude differentials.

ExxonMobil's refinery throughput averaged 4.3 million barrels per day (MMB/D), higher than the year-earlier level of 4.2 MMB/D.

Chemical: This unit contributed to the company’s $744 million profit, down from $935 million in the prior-year quarter, owing to weak margin.

Financials

During the quarter under review, ExxonMobil generated cash flow of $9.5 billion from operations and asset divestments, up from $8.8 billion in the year-ago quarter. The energy giant returned $3.5 billion to its shareholders through dividends. Capital and exploration spending was down 13% year over year to $7.8 billion.

Other News

To combat low production of oil & natural gas over the years and double its earnings and operating cash flow within 2025, ExxonMobil has taken a bold step of streamlining its world-wide exploration operations.

With the restructuring, ExxonMobilhas decided to form three new upstream firms by reportedly folding seven companies. The new companies will be ExxonMobil Upstream Oil & Gas Company, ExxonMobil Upstream Business Development Company and ExxonMobil Upstream Integrated Solutions Company.

Zacks Rank and Key Picks

Currently, ExxonMobil carries a Zacks Rank #5 (Strong Sell). Some better-ranked players in the energy space include Jones Energy, Inc. (OTC:JONE) , RGC Resources Inc. (NASDAQ:RGCO) and Sunoco LP (NYSE:SUN) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jones Energy expects 2019 earnings to grow 19% year over year.

RGC Resources delivered average positive earnings surprise of 87.64% in the preceding four quarters.

Sunoco LP pulled off average positive earnings surprise of 18.39% in the trailing four quarters.

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