Exxon To Post Strong Improvement In Its Earnings Despite Weak Downstream Operations

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Exxon Mobil

Exxon Mobil (NYSE:XOM), the world’s largest publicly traded oil company, is set to post its September quarter 2017 financial results on 27th October 2017((Exxon Mobil To Announce September Quarter Results, www.exxonmobil.com)), along with its competitor, Chevron (NYSE:CVX). The market expects the company to report a solid improvement in its revenue as well as earnings, despite its downstream operations being negatively affected by Hurricane Harvey during the third quarter. However, Exxon’s cash flow position is likely to deteriorate, since the company has maintained a high capital expenditure budget of $22 billion for the year.

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Key Trends Witnessed in 3Q’17

  • Commodity prices remained volatile in the last three months due to the impact of various hurricanes and storms along the US coastline. Despite this, the WTI crude oil prices averaged at $48.18 per barrel for the September quarter, very similar to the previous quarter. With no significant improvement in commodity prices, Exxon’s upstream 3Q’17 revenues are highly dependent on its production volumes.
  • Due to the heavy rains and floods caused by Hurricane Harvey in early September, Exxon had to shut down its Baytown and Beaumont refineries in the US Gulf Coast for a few days. Though the company resumed its operations quickly, this could impact its downstream performance for the quarter.

  • During the quarter, Exxon announced that it has added 22,000 acres to its existing 6 billion barrels of oil equivalent (boe) Permian Basin portfolio since May 2017. This makes the company one of the most active operators in the Permian Basin, which is considered to be a highly coveted oil play due to its high quality reserves and low cost of production. The company currently operates 19 drilling rigs in Midland Basin and the Delaware Basin, where the unit development cost is around $7 per barrel.
  • Apart from expanding its presence in the Permian Basin, Exxon has continued to explore new wells offshore Guyana and yielded excellent results. In July, the company discovered additional oil in the Payara reservoir offshore Guyana, increasing the total discovery to roughly 500 million boe. This has increased the estimated gross recoverable resource for the Stabroek Block in the range of 2.25-2.75 billion boe, which is likely to produce world class oil and deliver strong returns.

Exxon’s Presence In Offshore Guyana

  • On the financial side, Exxon declared a cash dividend of $0.77 per share to its shareholders for the third quarter. This is similar to the dividend paid by the company in the previous quarter.

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