Exxon Mobil’s 3Q’16 Earnings To Improve Due To Recovery In Commodity Prices
Exxon Mobil (NYSE:XOM), the world’s largest publicly traded oil and gas company, has lost more than 7.5% of its stock value in the last three months, despite posting a decent set of June quarter 2016 results. While the company had posted a strong improvement in its top line as well as pre-tax earnings on a sequential basis, its inability to meet the consensus expectations made the investors wary of its fundamentals.
Given that the commodity prices, particularly natural gas, have shown initial signs of recovery in the last few months, we expect the US-based integrated company to post a notable increase (on a sequential basis) in its revenue as well as top line in its September quarter results, which are likely to be released on the 28th of this month [1].
- Rising 21% This Year, What Lies Ahead For Exxon Stock Following Q1 Earnings?
- Down 9% Since The Beginning of 2023, What Should You Expect From Exxon Mobil Stock?
- Will Exxon Mobil Stock Trade Higher Post Q2?
- What’s Happening With Exxon Mobil Stock?
- Exxon Mobil Stock Likely To Trade Lower Post Q4
- What To Expect From Exxon Mobil’s Stock Post Q2?
Henry Hub natural gas prices, a global benchmark for gas prices, recovered almost 35% in the third quarter, while crude oil prices remained flat during the same period. Since Exxon Mobil has a significant presence in the natural gas market, the recovery in the gas prices is expected to result in an improvement in the company’s price realization, and, in turn, its top line growth in the quarter. However, commodity prices continue to be much lower compared to a year ago. As a result, the company’s revenue and earnings will be remain depressed compared to the last year.
Source: US Energy Information Administration (EIA)
On the cost front, Exxon Mobil’s consistent efforts to bring down its operating costs to sustain its operating margins are likely to bear fruit this quarter. For instance, the oil and gas company has managed to reduce its development cost in the Permian basin from around $25 per barrel equivalent in 2014 to under $10 per barrel equivalent in the first quarter of 2016. Based on the progress of the company’s cost reduction initiatives, we expect its operating income to improve sequentially, resulting in a jump in its bottom line.
Source: Exxon Mobil’s 2Q’16 Presentation
Have more questions about Exxon Mobil (NYSE:XOM)? See the links below:
- Will Exxon Mobil Be Able To Sustain Its Dividend For Long?
- Should Investors Worry About Exxon Mobil’s Increasing Debt?
- Why Will Exxon Mobil’s Upstream Operations Drive Its Value In The Future?
- How Will Exxon Mobil’s Revenue Move If Crude Oil Prices Average At $50 Per Barrel Until 2018?
- How Will Exxon Mobil’s Revenue Move If Crude Oil Prices Rebound To $100 Per Barrel By 2018?
- How Will Exxon Mobil’s Production Progress In The Next Five Years?
- Exxon Mobil 2Q’16 Results: Are They As Bad As They Appear?
- Exxon Mobil To See A Notable Drop In Its 2Q’16 Earnings Despite Moderate Recovery In Commodity Prices
- Who Will Acquire InterOil? – ExxonMobil Or Oil Search?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Exxon Mobil
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
Notes:- Exxon Mobil To Announce Third Quarter 2016 Results, www.exxonmobil.com [↩]