Rebound In Upstream Operations To Drive Exxon Mobil’s 3Q’18 Results

by Trefis Team
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Exxon Mobil
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Exxon Mobil (NYSE:XOM), the world’s largest publicly traded oil and gas company, is set to report its September quarter financial performance on 2nd November 2018. The market expects the company to post a solid performance driven by improved price realization and higher production for its upstream operations. We believe that the company’s focus on the Permian Basin and new offshore discoveries in Guyana and Brazil, and LNG opportunities in Mozambique, will drive a large portion of its value in the long term.

We currently have a price estimate of $80 per share for Exxon Mobil, which is in line with its market price. View our interactive dashboard – Exxon Mobil’s Price Estimate – and modify the key drivers to see the impact on the company’s valuation.

Key Trends To Watch For In 3Q’18 Results

  • Commodity prices have witnessed a rebound since the beginning of 2018 due to the extension of the Organization of Petroleum Exporting Countries’ (OPEC) production cuts until the end of the year. Brent crude oil price rose sharply in the third quarter and averaged at $75.07 per barrel, 44% higher compared to the same quarter of last year. Given the jump in commodity prices, we expect Exxon Mobil to witness higher price realization in the quarter, which will drive its top-line growth.
  • Similar to the last quarter, the company’s tight oil production growth in the Permian Basin and Bakken region is expected to drive its upstream revenue for the quarter.
  • Exxon’s efforts to reduce its gas exposure and strengthen its portfolio are likely to yield benefits in the current quarter as well as for full year 2018. The company expects its 2018 average volumes to be around 3.8 million oil equivalent barrels per day, excluding the impact of its divestment program.

  • Exxon’s deepwater projects in Ghana and Brazil, the unconventional liquids play in the Permian Basin, the low cost LNG opportunity in Papua New Guinea, and Mozambique have a significant upside potential for the company and are expected to contribute to its value in the long term.
  • Exxon has restructured its downstream operations by integrating its refining and supply division with its fuel and lubricants business. This will aid its downstream profits by streamlining the operations and improving decision making.
  • Exxon is also focused on reducing its exposure to stagnant markets by selling its assets in Indonesia and Japan. The company is said to be in talks to sell downstream assets in other non-profitable, stagnant markets. This divestment program is likely to boost the company’s returns in the near term.

 

Do not agree with our forecast? Create your own price forecast for Exxon Mobil by changing the base inputs (blue dots) on our interactive dashboard.

 

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