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ExxonMobil, Chevron Profits Surge, Costs Decline as Oil, NatGas Rebound Takes Hold

ExxonMobil Corp. more than doubled its profits in the first quarter, its best since 2015, with earnings soaring 122%, while Chevron Corp. sowed its third consecutive three-month profit, turning around a year-ago loss.

Each of the supermajors also highlighted their Permian Basin prowess, as well as a burgeoning lineup of global liquefied natural gas (LNG) projects.

Irving, TX-based supermajor ExxonMobil said Friday it earned $4 billion (95 cents/share) in 1Q2017, compared with $1.8 billion (43 cents) in 1Q2016. Capital and exploration expenses fell by 19% to $4.2 billion. Cash flow from operations and asset sales totaled $8.9 billion, including sales proceeds of $687 million.

"Our results reflect an increase in commodity prices and highlight our continued focus on controlling costs and operating efficiently," said ExxonMobil CEO Darren W. Woods. "We continue to make strategic acquisitions, advance key initiatives and fund long-term growth projects across the value chain."

Upstream earnings improved to $2.3 billion, versus a year-ago loss of $76 million as liquids and natural gas realizations moved higher. The U.S. upstream arm lost $18 million, up from a year-ago loss of $832 million.

Production volumes declined 4% to 4.2 million boe/d, primarily from lower entitlements from increasing prices and higher maintenance. Natural gas production of 10.9 Bcf/d increased from a year ago by 184 MMcf/d with project ramp ups offsetting field declines. Liquids production of 2.3 million b/d decreased 205,000 b/d because of lower entitlements and higher maintenance activity, mainly in Canada and Nigeria.

Between January and March, ExxonMobil purchased six million shares of common stock for $496 million. A combined 96 million shares also were issued to complete the purchase of InterOil Corp. and to acquire Bass Operating Co. entities that owned oil and gas properties primarily in the Permian Basin. ExxonMobil struck a $6.6 billion deal in January with the Bass family to acquire 275,000 total acres, mostly within the Delaware sub-basin of New Mexico.

An integrated asset team in the Permian "is in place to manage these newly acquired properties," investor relations chief Jeff Woodbury said during a conference call. "In order to fully capitalized on the advantages offered by the highly contiguous acreage position and our persistent participation across the full value chain, the team is leveraging corporate expertise in unconventional development, research, project management and logistics. We do expect to spud the first well on the new acreage shortly."

Woodbury also highlighted another notch in ExxonMobil's long LNG queue, a $2.8 billion deal to buy a 25% stake in Italy's Eni SpA Mozambique project. Eni has a separate Mozambique LNG project led by Anadarko Petroleum Corp.

The ExxonMobil-Eni project, slated to deliver gas to Asia-Pacific markets, includes six discoveries holding at least 85 Tcf of gas-in-place and 10 MMcf/d of well deliverability, Woodbury said. According to the agreement, ExxonMobil is to be operator the onshore facilities, estimated to provide 40 million metric tons/year of development.

Several ExxonMobil LNG export projects now are in queue including Mozambique, Papua New Guinea, Scarborough in Western Australia and Golden Pass Products LLC, a retrofit of an import facility on the Gulf Coast near Sabine Pass, TX, that was recently cleared by the Department of Energy to export up to 2.21 Bcf/d worldwide.

Woodbury was asked which LNG project took priority. ExxonMobil is forecasting gas demand to rise about 1.5% a year to 2040, eventually becoming the second highest source of supply behind oil, he noted.

"On an LNG basis, over that same time period up to 2040, we have LNG capacity and thus demand growing by about 250%," he said. "So there is the business case right there. Now obviously, like any type of supply/demand mechanics, you're going to see periods of tightness, periods where there's excess demand and requires a supply response.

Many global LNG projects are progressing, but "I will tell you that not all of them will move at the same pace," Woodbury said. "We've got a good diverse portfolio, some that are associated with brownfield expansions to existing facilities, such as the Papua New Guinea or the Golden Pass. And then others more large greenfield developments like Mozambique.

"Each of them have unique characteristics that will try to place them in the market, but it's not choosing one or the other at this point. It's a matter of moving them all forward, and depending on all the different variables that have to work for multi-billion dollar investment, some will come to maturity quicker."

In the downstream arm, ExxonMobil's profits climbed by $210 million to $1.1 billion. Petroleum product sales of 5.4 million b/d were 61,000 b/d higher than in 1Q2016. U.S. downstream earnings rose to $292 million from $105 million. Chemical earnings fell to $1.2 billion, down $184 million from a year ago, with U.S. profits of $529 million, down about $52 million year/year.

ExxonMobil now has 18 major projects being executed, six upstream, eight downstream and four petrochemical projects, including on the U.S. Gulf Coast.

Chevron Reverses Year-Ago Losses

San Ramon, CA-based supermajor Chevron earned $2.7 billion ($1.41/share) in 1Q2017, turning around from year-ago losses of $725 million (minus 39 cents). Included in the quarter was a gain of $600 million from selling an upstream asset, while foreign currency effects decreased profits by $241 million, versus a decrease of $319 million a year earlier. Cash flow from operations increased to $3.9 billion from $1.1 billion in 1Q2016.

"First quarter earnings and cash flow improved significantly from a year ago," said CEO John Watson. "We benefited from increasing crude oil prices and ongoing efficiencies being implemented across the company."

Capital and exploratory (C&E) expenditures in 1Q017 decreased to $4.4 billion from $6.5 billion. C&E in the first three months fell 56% from the full-year 2014 average, with operating expenditures down 26% in the same timeframe.

Chevron is making "good progress on reducing our spend," Watson said. "Our operating expenses were reduced by about 14% from first quarter 2016, and our capital spending declined over 30% from a year ago."

In the Permian Basin, Chevron's No. 1 U.S. onshore target, production jumped year/year by 33%. Chevron now has 12 rigs in operation across the Midland and Delaware sub-basins and expects to have 20 total by the end of 2018.

The operator also started up several projects, with all three trains online at the massive Gorgon LNG export facility in Australia. Commissioning of Wheatstone LNG facility, also in Australia, is set to start up by mid-year, with the second train scheduled to ramp six to eight months later.

"Overall net boe production in 1Q2017 increased 3%, compared to the 2016 full year, and we are on track to meet the 4-9% growth goal for 2017 before the effect of asset sales," Watson said.

The upstream business earned $1.52 billion, coming back from a year-ago loss of $1.46 billion. The U.S. upstream arm earned $80 million versus a 1Q2016 loss of $850 million, primarily because of higher crude oil realizations and lower depreciation and operating expenses.

Worldwide net production was 2.68 million boe/d, nearly flat from 2.67 million boe/d in 1Q2016. U.S. output fell 4% year/year to 672,000 boe/d net, with volume increases from base business in the Gulf of Mexico and the Jack/St. Malo capital project, along with increases from shale/tight properties in the Permian.

Volume increases were more than offset by the impact of normal field declines and asset sales, which reduced output by 68,000 boe/d. The net liquids component of production increased 3% to 504,000 boe/d, while net natural gas production decreased 21% to 1.01 Bcf/d.

Chevron's average sales price for crude oil and natural gas liquids was $45/bbl in 1Q2017, up from $26/bbl a year ago. The average sales price of natural gas was $2.39/Mcf, compared with $1.32 in the year-ago quarter.


 

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