With natural gas and liquids prices soaring, along with ethane demand, ExxonMobil hit on all cylinders during 2Q2021.
The supermajor unveiled its quarterly report on Friday, offering investors some encouraging news following a volatile run over the past few quarters. The gains were keyed to higher commodity prices and a stellar performance by the Chemicals unit.
“Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our products,” CEO Darren Woods said.
“We’re realizing significant benefits from an improved cost structure, solid operating performance and low-cost-of-supply investments that, together, are generating attractive returns and strong cash flow to fund our capital program, pay the dividend and reduce debt.”
Sharply higher gas and oil prices didn’t hurt.
ExxonMobil fetched an average realized price for its U.S. gas of $2.78/Mcf, compared with $1.57 in 2Q2020. Realized gas prices beyond U.S. shores averaged $6.76 versus $4.07.
The realized price for U.S. crude during 2Q2021 averaged $63.29/bbl, compared with the year-ago average of $21.79. Prices for crude outside the United States averaged $60.52, versus $20.91 in 2Q2020.
Ethane Feed Advantage
With ethane demand soaring and margins improving, the Chemicals business recorded the “best quarter in company history,” Woods said. Margins improved on higher product prices, reflecting stronger demand and regional supply constraints.
North America’s ethane feed advantage also grew, a prescient sign as ExxonMobil and partner Saudi Basic Industries Corp. prepare to launch the world’s largest cracker in South Texas. The 1.8 million metric ton/year (mmty) project, set to ramp by year’s end, initially was set for completion in 2022.
The cracker in July reached mechanical completion for a monoethylene glycol unit and two polyethylene units. The facility is sited near the busy Port of Corpus Christi, which moves oil, condensate and liquefied natural gas overseas.
To feed the cracker in part, ExxonMobil is looking to its vast Permian holdings. In the No. 1 Lower 48 play, Permian output jumped by 34% from a year ago to average 400,000 boe/d.
Good In Guyana
Beyond the Lower 48, development expertise continues in Guyana’s offshore, where the plethora of discoveries from the Stabroek Block has been ceaseless in the past couple of years.
Recent discoveries at Uaru-2, Longtail-3 and Whiptail have increased “confidence in the quality and size of the resource,” according to ExxonMobil. It now expects the offshore block to support seven to 10 floating production, storage and offloading facilities.
“Exploration, appraisal, and development drilling continues, with a total of six drillships now operating offshore Guyana,” management noted. Liza Phase 2 is on target to ramp in 2022. Payara is set to begin operations in 2024, and Yellowtail is targeted for a 2025 startup.
Worldwide liquids and natural gas production overall fell from a year ago to 3.58 million boe/d from 3.64 million boe.
Global natural gas production volumes, though, shot higher to 8.29 Bcf/d from 7.99 Bcf/d. U.S. gas volumes for sale rose slightly to 2.80 Bcf/d from 2.64 Bcf/d. Canada and other Americas volumes declined to 189 Mcf/d from 269 Mcf/d.
Capturing Carbon, Expanding Biofuels
Expanding methods to reduce emissions also was on the agenda during the second quarter. The Lower Carbon Solutions business extended efforts to identify opportunities and establish partnerships in carbon capture and storage (CCS), hydrogen and low-emissions fuels.
In July, memoranda of understanding were clinched to participate in the Acorn CCS project in Scotland and to potentially develop carbon dioxide (CO2) infrastructure in France.
Acorn as designed would capture and store 5-6 mmty of CO2. The CO2 collaboration in the Normandy region of France plans to use CCS technology to reduce emissions by up to 3 mmty by 2030.
During the quarter, ExxonMobil also extended an agreement with Global Clean Energy to purchase up to 5 million bbl of renewable diesel; commercial production should begin in 2022. ExxonMobil has a goal to produce more than 40,000 b/d of renewable fuels by 2025.
Even with a big batch of projects and new start ups, capital expenditures (capex) are set to remain in the “lower end” of $16-19 billion this year in part on efficiencies. Capex through the first six months totaled $7 billion.
Projects earmarked through the end of the year include the ethane cracker, as well as projects in Brazil, Guyana and the Permian.
Efficiencies helped reduce structural costs by $3 billion overall in 2020. From January through June, another $1 billion-plus in savings also was captured. Management said it’s on pace to achieve total structural cost reductions of $6 billion in 2023 relative to 2019.
Quarterly net profits jumped to almost $4.7 billion ($1.10/share) in 2Q2021, overcoming a year-ago loss of $1.1 billion (minus 26 cents). In a sign of how much the rise in commodity prices during the latest quarter helped, ExxonMobil had turned a profit of $2.7 billion (64 cents/share) in the first quarter.
Cash flow jumped to $9.9 billion from $43 million.
Total upstream earnings jumped to $3.2 billion, reversing the year-ago loss of $1.7 billion. U.S. upstream topped $663 million, compared with the loss of $1.2 billion in 2Q2020.
Upstream efficiencies proved to be a big positive in the latest period, with the segment’s capex falling from a year ago to $2.8 billion from $3.6 billion. U.S. upstream capex declined to $925 million from $1.6 billion.
In the downstream arm, quarterly losses totaled $227 million, compared to year-ago earnings of $976 million. The U.S. downstream segment lost $149 million in 2Q2021, up from its 2Q2020 loss of $101 million.
Meanwhile, chemical profits climbed to $2.3 billion from $467 million in 2Q2020. The U.S. arm accounted for more than half of the profits at nearly $1.3 billion, compared with $171 million a year earlier.
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