10-Q: ExxonMobil Reports $8.2 Billion in First Quarter Earnings, Impacted by Lower Refining Margins and Natural Gas Prices

ExxonMobil's first-quarter 2024 earnings decreased to $8.2 billion, primarily due to lower refining margins and natural gas prices, despite increased production from advantaged assets.

Summary

• ExxonMobil reported first-quarter 2024 earnings of $8.2 billion, or $2.06 per share, a decrease from $11.4 billion in the same period last year.
• The decline in earnings was mainly attributed to lower industry refining margins and decreased natural gas prices.
• Capital and exploration expenditures totaled $5.8 billion, down $0.5 billion from the first quarter of 2023.
• The company's upstream production decreased slightly to 3.8 million oil-equivalent barrels per day.
• Refinery throughput was 3.843 million barrels per day, with sales of 5.232 million barrels per day.
• Chemical product sales reached 5.054 million metric tons, while specialty product sales were 1.959 million metric tons.
• ExxonMobil's structural cost savings reached $10.1 billion cumulatively, including an additional $0.4 billion in the first quarter of 2024.
• The company repurchased 27.5 million shares of its stock for $3.0 billion during the quarter.
• Total debt at the end of the first quarter of 2024 was $40.4 billion, compared to $41.6 billion at the end of 2023.
• The company distributed $3.8 billion to shareholders through dividends in the first quarter of 2024.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to decreased earnings and production, offset by cost savings and shareholder returns. The company is facing headwinds but is taking steps to improve efficiency and profitability.

Positives

• ExxonMobil achieved $0.4 billion in structural cost savings in the first quarter of 2024, contributing to a cumulative total of $10.1 billion.
• The company's upstream production saw growth from advantaged assets, particularly in Guyana.
• ExxonMobil's debt decreased to $40.4 billion from $41.6 billion at the end of 2023.
• The company continues to return value to shareholders through dividends and share repurchases.
• Chemical product sales volumes increased compared to the same period last year.

Negatives

• ExxonMobil's first-quarter earnings decreased to $8.2 billion from $11.4 billion in the prior year.
• The company experienced lower industry refining margins and decreased natural gas prices.
• Upstream production decreased slightly by 47 thousand oil-equivalent barrels per day compared to the first quarter of 2023.
• Energy Products earnings were significantly impacted by weaker refining margins.
• Unfavorable timing effects from derivatives mark-to-market impacts decreased earnings by $660 million in Energy Products.

Risks

• The company faces risks related to fluctuations in commodity prices, particularly crude oil and natural gas.
• Ongoing geopolitical tensions and conflicts in the Middle East could impact market stability.
• The company is subject to various legal proceedings, including those related to climate change and environmental issues.
• The Pioneer Natural Resources merger is subject to regulatory approvals and may not close as expected.
• The company's future performance is dependent on the successful execution of its strategic projects and cost-saving initiatives.

Future Outlook

ExxonMobil plans to invest between $23 billion and $25 billion in 2024, with actual spending subject to project progress and acquisitions. The company expects to increase its share repurchase program to $20 billion annually through 2025 after the Pioneer transaction closes, assuming reasonable market conditions. The company's long-term plans are based on its Global Outlook research, which assumes increasing policy stringency and technology improvement to 2050.

Management Comments

• Management uses earnings excluding identified items to improve comparability of the underlying business across multiple periods by isolating and removing significant non-operational events from business results.
• Management believes that cash flow from operations and asset sales is useful for investors to consider when evaluating cash available for investment and financing activities.
• The company's capital allocation priorities are investing in high-return projects, maintaining a strong balance sheet, and sharing success with shareholders.

Industry Context

The report indicates that crude oil prices remained relatively stable, while natural gas prices decreased due to high inventory levels and lower demand. Refining margins increased due to growing demand and supply disruptions. Chemical margins remained weak due to new capacity additions offsetting demand growth. These trends reflect broader market conditions in the energy and chemical industries.

Comparison to Industry Standards

• ExxonMobil's reported earnings decline is consistent with the challenges faced by other major oil and gas companies during the first quarter of 2024, which were also impacted by lower refining margins and natural gas prices.
• The company's focus on cost savings and strategic projects aligns with industry trends aimed at improving efficiency and profitability.
• The planned merger with Pioneer Natural Resources is a significant move to consolidate assets in the Permian Basin, similar to other consolidation activities seen in the industry.
• ExxonMobil's capital expenditure plans are in line with other major players who are balancing investments in traditional energy with low-carbon initiatives.
• The company's share repurchase program is a common practice among large energy companies to return value to shareholders.

Legal Proceedings

• ExxonMobil is involved in various legal proceedings, including those related to climate change and environmental issues.
• The company is in a dispute with the Department of Justice regarding the Schnegg well in Ohio, with the DOJ demanding $25 million to settle alleged violations.
• ExxonMobil agreed to settle alleged violations of the Texas Clean Air Act for $2.2 million.

Stakeholder Impact

• Shareholders will be impacted by the decrease in earnings, but also benefit from dividends and share repurchases.
• Employees may be affected by ongoing cost-saving measures and potential workforce reductions.
• Customers will be impacted by changes in product availability and pricing.
• Suppliers will be impacted by changes in the company's procurement activities.
• Creditors will be impacted by the company's debt levels and financial performance.

Next Steps

• The company will continue to evaluate its asset mix for potential upgrades.
• ExxonMobil will continue to evaluate opportunities to enhance its business portfolio through acquisitions.
• The company will continue to monitor the progress of the Pioneer Natural Resources merger.
• The company will continue to execute its share repurchase program.

Key Dates

Keywords

ExxonMobil, earnings, oil, gas, refining, production, cost savings, Pioneer Natural Resources, capital expenditures, dividends, share repurchases