Is Exxon Mobil Worth the Money?
Exxon Mobil (XOM) reported third-quarter 2015 results on Friday, 30th Oct. The company reported revenues of $67.34 billion compared to $ 107.13 billion reported for the third quarter last year. Earnings per share also dropped drastically from a year ago three month period from $1.89 per share to $1.01 per share. Exxon Mobil’s earnings per share beat the consensus estimates of $0.89 per share given by analysts at reputed firms like Thomson Reuters and Zacks.
Exxon Mobil’s Q3 result has suffered mainly due to the poor performance in the Upstream segment. The segment was able to earn only $1.4 billion profit in the last quarter, down $5.1 billion year over year. The production of Liquids was 12.9% higher than last year at 2,331 million barrels per day. Natural gas production was 9,524 MCF/d (millions of cubic feet per day), down 10.1% from the year-ago period. The total average rate of production was 3.918 million barrels of oil-equivalent per day, up 2.3% year over year. The slight increase in production offset the downside caused by lower realizations for liquids as well as gas products.
The Downstream segment was in complete contrast to the Upstream segment. The profit from this segment doubled from $ 1 billion to $ 2 billion year over year. Exxon Mobil's refinery throughput during the previous quarter was 4.5 million barrels per day (MMBPD), down 2.9 % from the quarter one year ago. Despite lower throughput the drastic increase in profit could only be attributed to stronger margins. The Chemical segment profit was $ 27 million or 2.25 % higher than last year’s Q3 at $ 1.227 billion aided by lower feedstock costs that gave a boost to margins.
The company receive cash proceeds worth $ 491 million in the third quarter. Including asset sales the cash flow from operations adds up to $ 9.7 million compared to last year’s Q3 cash flow of $ 12.5 billion. A total cash of $ 3.6 billion was returned to shareholders in the form of dividends and share purchases to reduce shares outstanding. For the first nine months of 2015, cash flow from operations totalled $ 27.6 billion and capex totalled $ 23.6 billion.
It is obvious that Exxon’s earnings are highly dependent on the price of crude oil. In the two earnings charts of last 7 quarters we can see the decline in earnings through last one year. And it is also interesting to notice the little flat part at the end especially for the third quarter.
This tells a lot about how Exxon Mobil has seen through the worst part of the on-going depression in oil industry. Now the production levels have been brought down enough by most major players of the West. So oil isn’t going to drop any further. But still EIA has been cautious while projecting oil price for next year due to the uncertainties faced by this market. The Middle East is not in support of cutting production as their margins have still not slimmed due to the quality of their assets. Hence the uncertainty still prevails. But largely, the oil market seems to have crossed the chasm for now and so there is definitely a potential upside for fundamentally consistent scrip like Exxon Mobil.