Exxon Mobil reports US$8.9 billion fourth-quarter profit as oil prices soar

Published Wed, Feb 2, 2022 · 11:26 PM

[HOUSTON]

EXXON Mobil, the largest US oil company, reported its most robust earnings in 7 years on Tuesday (Feb 1) as it rode a wave of climbing oil and natural gas prices.

Heralding its financial comeback after several years of mediocre returns and criticism over its environmental performance, the company said that it would resume buying back its stock to the tune of US$10 billion over the next 2 years, the first repurchase since 2016.

Exxon said it made US$8.9 billion in the 3 months that ended in December on revenue of US$84.9 billion. The company earned US$6.8 billion in the third quarter. For the year, Exxon earned US$23 billion, compared with a loss of US$22.4 billion in 2020 when oil and gas prices plummeted because of the economic slowdown caused by the pandemic. The annual profit was the highest since 2014.

The company's success, however, was largely because of a recovery of oil prices throughout 2021, as demand for energy rebounded.

By the end of the fourth quarter, the price of West Texas Intermediate crude, the US bench mark, had risen by more than 50 per cent, reaching an average of US$67 a barrel in December. Oil prices have continued to climb to more than US$80 a barrel because of tightening supplies and tensions between Russia and Ukraine. Natural gas prices rose by more than 40 per cent from 2020 in the quarter and have picked up again in recent weeks as temperatures have dropped in many regions.

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"We've made great progress in 2021, and our forward plans position us to lead in cash flow and earnings growth, operating performance and the energy transition," said Darren Woods, Exxon's chief executive.

The company reported that it had increased its production of oil and gas by 2 per cent from 2020, largely because of increased production in the Permian basin that straddles Texas and New Mexico, and off the coast of Guyana in South America. It also reported improved margins in its refining business, despite the continued slump in jet fuel demand.

Addressing rising concerns about climate change, Woods told analysts in a conference call on Tuesday that the company was committed to investing in carbon capture and sequestration, biofuels like renewable diesel and hydrogen energy.

"There is a growing recognition and a growing acceptance for the need for a variety of approaches," Woods said, "to make sure that we make progress on reducing emissions but at the same time don't compromise the quality of peoples' lives." Exxon shares were up more than 6 per cent at the close of trading on Tuesday. Still, Exxon's stock price remains below its levels of a decade ago. In response to mediocre returns, investors have pressured Exxon and other oil companies to control spending and improve shareholder returns with dividends and stock buybacks.

The company last month said that it would spend US$20 billion to US$25 billion a year on investments through 2027, a decrease of up to 33 per cent from spending plans before the pandemic sent oil prices crashing in 2020.

Returning cash to shareholders is part of an industrywide departure from automatically investing in more production and acquiring reserves of oil and gas. That trend has supported share prices but also limited US oil production to below 2019 levels.

Exxon announced on Monday that it was streamlining its businesses, combining its chemical, refining and marketing businesses and management of its technology and engineering units to save more than US$6 billion over the next 2 years in comparison with 2019 spending. The company will move its headquarters to a Houston suburb where most operations are already centred on a 156-hectare campus, from Irving, Texas, a suburb of Dallas.

On Tuesday, Woods said the new structure would "further strengthen our competitive advantages". NYTIMES

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