Exxon Mobil (NYSE:XOM) reported quarterly results last week which were roughly in-line with expectations as the company’s sequential results dipped slightly from $10.68 billion in the last quarter to $10.33 billion as oil prices declined during the period. In comparison with last year earnings jumped by 40% as higher oil prices overshadowed a decline in oil and natural gas liquids production and stable gas output. Downstream earnings increased by 36% over the same period in 2010, and were driven by strength in North America. Other oil majors such as Chevron (NYSE:CVX) and BP (NYSE:BP) have also posted strong annual growth on the back of higher commodity prices.
We maintain our $93 price estimate for Exxon Mobil’s stock, which is a 13% premium over its current market price.
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Prices, international markets drive upstream revenue growth
Exxon Mobil’s upstream production saw a slight decline over the same period last year. Oil and natural gas liquids production dropped in the U.S., Europe and Africa but increased production in Asia offset some of that decline. Overall liquids production dropped from 2,421 kilo barrels /day (kbd) from Q3 2010 to 2,249 kbd this quarter. Natural gas production remained stable while overall oil equivalent production declined by 4% despite stable capital expenditures in exploration and production. However, strong oil prices and increased demand for natural gas from Asian markets drove earnings higher, as a majority of the growth in upstream revenues came from international markets.
The company’s capital expenditures declined in the U.S. but rose in international markets, indicating that Exxon is focusing on developing resources outside the country.
Refinery throughput showed slight declines in most geographies in the last quarter compared to Q32010 numbers. Earnings in the downstream segment were driven by strong growth in North America, where profits jumped by nearly 400% and offset a decline in earnings from international operations. This discrepancy could be a result of the wide spread between WTI and Brent prices in the last quarter, which has reduced the price of raw crude for refineries in the U.S.