ExxonMobil Corp.'s profits climbed 6% year/year in 4Q2012, with annual earnings jumping 9%, despite a steep fall-off in global natural gas and oil production, the supermajor reported on Friday.
Net profits from October through December beat Wall Street estimates at $9.95 billion ($2.20/share), versus $9.4 billion ($1.97) a year earlier. Revenue slumped 5.3% to $115.17 billion. Last year, which recorded net earnings of $44.9 billion, was the best since 2008's record-breaking profits of $45.2 billion. The gains four years ago came in part because oil prices that year soared above $145/bbl (see Daily GPI, Feb. 2, 2009). In 2012 profits followed some divestitures, as well as stronger performance in the refining and chemical divisions, not from price changes.
ExxonMobil in 2012 spent a record $39.9 billion in capital expenditures to fuel future oil and natural gas output, said CEO Rex Tillerson. The increase allows the company to continue "pursuing opportunities to find and produce new supplies of oil and natural gas to meet global demand for energy." U.S. upstream sector spending almost doubled in 4Q2012 to $4 billion from year-ago spending of $2.4 billion.
Most of the capital spending is with the long-term in mind, said Investor Relations chief David Rosenthal. A big chunk of spending was directed to the Gulf of Mexico, he noted.
"It's really a number of things, from drilling wells to processing to seismic to capture different opportunities," he told analysts during a conference call. "The Phobos well has spud" and ExxonMobil is preparing to participate in another well soon. "It's also a very large portfolio and we are running a lot of seismic activity both on the imaging and processing side, and for analysis."
Capital spending also was directed to help the company capture some of the expected returns from higher prices for crude and liquids -- it already is the largest natural gas producer. ExxonMobil added to its cupboard with assets in the Bakken Shale in a purchase with Denbury Resources Inc., and it formed joint ventures with Russia's OAO Rosneft to tap Arctic resources. An estimated $3.14 billion is being used to buy Calgary's Celtic Exploration Ltd., which has unconventional gas assets in the Montney and Duvernay shales (see Daily GPI, Oct. 18, 2012).
ExxonMobil's oil and gas production fell through all four quarters of 2012, down 5.9% from 2011. From October through December output totaled 54.3 million boe/d, down 5% year/year. The decline led to a $1 billion loss, or a 12% decline, in quarterly earnings for the exploration and production business to about $7.8 billion.
ExxonMobil was able to overcome price volatility and lower output last year because of the "value of our integrated business model and other competitive advantages," Rosenthal said. Natural gas operations were mostly at a standstill, with only a few rigs drilling specifically for gas; in July the company had 51 dry gas rigs in operation (see Daily GPI, July 27, 2012). Globally, 4Q2012 gas output was 12.54 Bcf/d, down 1.14 Bcf/d from a year earlier.
However, Gulf Coast refining operations continue to be a bright spot, with plants slated to handle increasing crude oil production from unconventional plays throughout North America, Rosenthal said. "From the Gulf Coast all the way up into Canada, we are optimizing that entire circuit."
A series of huge new natural gas, oil and chemical projects are underway, beginning with the Kearl oilsands project in Canada, said the investor relations chief. Kearl was scheduled to begin operations at the end of last year but harsh weather in Alberta stalled those plans to this quarter.
"Weather came earlier than normal, and then it has been brutally cold up there so we've had to adjust accordingly," Rosenthal said. Kearl also has jumped in costs to $12.9 billion for phase one from initial projections of $10.9 billion. Kearl's output is expected to hit 110,000 b/d of diluted bitumen, or oilsands crude, initially ramping up with about 37,000 b/d. The Kearl field is one of several Canadian projects that is slated to make the country one of the largest sources for oil production growth in ExxonMobil's global lineup.
Kearl production will be moved to southern markets with or without the controversial Keystone XL pipeline, he noted. "We do not have an issue in terms of logistics moving those barrels out of the Kearl project and into production."
Chevron Corp.'s profits in 4Q2012 totaled $7.2 billion ($3.70/share), compared with $5.1 billion ($2.58) a year earlier. Full-year profits were $26.2 billion ($13.32/share), down 3% from 2011's $26.9 billion ($13.44). Quarterly revenues fell to $56 billion from $58 billion, mostly on lower crude oil volumes, the San Ramon, CA-based major said.
"Our upstream portfolio continues to produce excellent results," said Chairman John Watson on Friday. "Strong cash flows allowed us to invest aggressively in our major capital projects and to acquire several important, new resource opportunities," including the Gorgon and Wheatstone liquefied natural gas export projects in Australia.
"We also expanded our global exploration resource acreage in 2012, including entries into five new countries, the addition of significant new acreage in the United States, and the recently announced acquisition of a 50% operated interest in a Western Canada LNG project" (see Daily GPI, Dec. 26, 2012).
Chevron added about 1.07 billion boe proved reserves in 2012, equal to 112% of net boe for the year, Watson noted. Worldwide production was 2.67 million boe/d in 4Q2012, up from 2.64 million boe/d in 4Q2011.
U.S. upstream earnings of $1.36 billion in 4Q2012 were down $242 million from a year earlier, mostly because of lower crude oil and natural gas realizations, partially offset by higher crude production. The company's average sales price per barrel of crude oil and natural gas liquids was $91 in 4Q2012, down from $101 a year ago. The average sales price of natural gas was $3.22/Mcf versus $3.62.
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