Exxon Faces Headwinds Heading Into The Fourth Quarter

by Trefis Team
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Exxon Mobil
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Exxon Mobil (XOM): Exxon Mobil is expected to report pre-earnings on the 1st of February. During the quarter WTI averaged $55 a share, and Brent Crude averaged $60 a share. Exxon Mobil during the the year, has embarked upon a series of initiatives to improve profitability. This was mostly done through reducing unprofitable ventures, and streamlining their various upstream/downstream segments, thereby improving synergies, through their business.  It should be noted Brent averaged $69, and WTI $59 during the same quarter last year.

We currently have a price estimate of $80 per share for Exxon Mobil, which is 10%  higher than the market price. View our interactive dashboard – Exxon Pre-Earnings – and modify the key drivers to see the impact on the company’s valuation.

What to Expect?

  • The company is expected to report an earnings per share of $1.07, according to our estimates. This represents a 22% increase yoy.
  • Revenues are expected to come in higher at $74 billion, this is up 11% yoy.
  • Margins are expected to be slightly affected, as the 3-2-1 crack spread average price fell during the quarter from $19 in the previous quarter to $15.

Exxon faced several issues during the quarter, mostly in the Gulf Coast, where refineries were hit.  This will affect earnings as downstream revenues face both revenue, and margin pressure.

The company has been investing in a number of new ventures, including the doubling of the Texas refinery, it also formed a joint venture with Plains All American, and Lotus Midstream, for a 1 million bbl/day pipeline, that will begin operation in 2021.

During the oil crash from 2014-2016 Exxon saw its debt increase by $16 billion. In the past two years Exxon has improved its balance sheet, reducing debt downward by $4 billion, which has been positive for the company’s cash flow. We expect that Exxon will continue this trend during the quarter, which should further help the company’s cash flow.

Overall, Exxon Mobil is expected to continue its run of positive results, that it has seen in previous quarters. With the company facing headwinds from oil prices being lower, and with downstream revenue expected to be weaker, we expect Exxon’s revenue rise to come in slightly lower in comparison to previous quarters.

 

 

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