Page 4 - NorthAmOil Week 05 2022

NorthAmOil COMMENTARY NorthAmOil

ExxonMobil, Chevron see earnings

bolstered by oil prices

ExxonMobil and Chevron reported fourth-quarter profits, bolstered by stronger oil and gas

prices, but some ongoing challenges have been reflected in the results

US STRONGER oil and gas prices continue to be from operations reached $17.1bn, while over
reflected in oil and gas companies’ quarterly the whole of 2021 it amounted to $48.1bn – its
WHAT: results. US-based super-majors ExxonMobil highest level since 2012. The company said this
ExxonMobil and Chevron and Chevron both reported their results for the more than covered its capex, debt reduction and
posted fourth-quarter fourth quarter of 2021 over the past week, with dividend payments.
profits. both posting profits after losses in the same quar- Looking ahead to 2022, ExxonMobil’s capex
ter of 2020. budget is $21-24bn. While this had been nar-
WHY: But while the outlook for the oil and gas rowed down from a range of $20-25bn for each
The US super-majors industry has improved considerably over recent year up to 2027, as announced in December, it
benefited from some of months, challenges still remain and commodity still marks a 36% increase in spending on 2021.
the strongest oil and gas prices alone are not enough to guarantee per- On the company’s fourth-quarter earnings
prices in years. formance. Indeed, Chevron’s earnings missed call, ExxonMobil’s CEO, Darren Woods, said he
analyst expectations and its outlook for the anticipated volumes in 2022 being “fairly con-
WHAT NEXT: year ahead pointed to further challenges that sistent” with what the super-major had achieved
Chevron’s production weighed on its share price in the wake of its in 2021. He added, though, that he expected the
outlook points to some results release. ExxonMobil fell short of ana- mix within ExxonMobil’s volume profile to con-
challenges ahead, but lyst expectations on fourth-quarter revenues, tinue improving, as well as earnings per barrel.
both companies plan despite beating them on earnings. One area where significant growth is pre-
to raise output in the Nonetheless, both Chevron and ExxonMo- dicted, though, is the Permian Basin. Woods
Permian Basin. bil demonstrated optimism over the coming noted on the earnings call that ExxonMobil’s
year, including by unveiling plans to ramp up Permian production had grown by over 25%
production in the US’ Permian Basin, even as y/y in 2021. He said the super-major expected
smaller producers continue to act with more its Permian output to grow another 25% in 2022,
restraint. Meanwhile, ExxonMobil’s announce- “with a very tight control on capital”.
ment that it will restructure its operations shows Current growth has been attributed in large
that cost-cutting continues to be a concern even part to efficiency gains, illustrating that despite
as profits rise. a more bullish outlook, even the super-majors Woods noted on
are not reverting to the pursuit of all-out shale
ExxonMobil growth. The move still suggests that the days the earnings call
ExxonMobil reported fourth-quarter earnings of strict shale production discipline could be that ExxonMobil’s
of $8.9bn, or $2.08 per diluted share, up from a coming to an end, but there are clear differences
historic $20bn loss a year ago. The latest result between how shale drillers were behaving in the Permian
represented its largest profit in seven years. mid-2010s and today, as pressure to prioritise
Excluding certain items, earnings amounted to returns has not gone away. production had
$2.05 per diluted share, beating analyst expec- ExxonMobil’s announcement that it will
tations of $1.93 per share as cited by Refinitiv. restructure its business in an effort to further cut grown by over
However, fourth-quarter revenue of $85.0bn fell costs also demonstrates ongoing shareholder 25% y/y in 2021.
short of analyst expectations of $91.9bn. pressure to retain discipline when it comes to
The super-major said its capital expenditure spending. The announcement came separately
budget had reached $5.8bn in the fourth quar- from the super-major’s earnings release, albeit
ter of 2021, up from $4.8bn year on year, and during the same week.
that its production for the quarter came in at Under the plan, ExxonMobil will combine its
3.8mn barrels of oil equivalent per day. This refining and chemicals businesses into a single
marked a 2% increase on 3.7mn boepd a year unit while putting its energy transition business
ago. Over the whole of 2021, its capex amounted on the same footing as its upstream and prod-
to $16.6bn, while production averaged 3.7mn ucts divisions. The move follows a shake-up of
boepd. the super-major’s board last year, which saw
In the fourth quarter, ExxonMobil’s cash flow three nominees of activist hedge fund Engine

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