Higher natural gas prices are predicted to boost ExxonMobil’s third quarter upstream profits by around $700 million, more than forecast for oil, the energy major said.
In its 3Q2021 earnings guidance, detailed in a Securities and Exchange Commission Form 8-K filing, ExxonMobil said gas would provide a bigger boost to earnings than oil, compared to second quarter results.
Oil prices, also strong between July and September, are predicted to increase quarterly profits by about $400 million versus 2Q2021. Wider refining margins, along with less maintenance downtime, should add $600 million.
The Chemicals arm, which in 2Q2021 had the best quarter in history, is forecast to see a $300 million decline in sequential earnings.
ExxonMobil is scheduled to report its quarterly results on Oct. 29.
BMO Capital Markets analyst Phillip Jungwirth pegged the quarterly profits “near” $1.57/share, which would be ahead of the firm’s $1.54 estimate.
“Cash flow indicates a higher beat…which should deliver strong free cash flow and faster deleveraging,” Jungwirth said. “Upstream mark-to-market was again a drag…while less scheduled maintenance added $300-500 million, consistent with guidance of higher upstream volumes from reduced planned maintenance.”
The upstream earnings forecast exceeds consensus by a wide margin, Jungwirth noted. If not for the predicted noncash mark-to-market derivatives loss, “the beat would have been greater with liquids/gas price gains exceeding our model.”
BMO expects ExxonMobil to report $12.6 billion in cash flow from operating activities, “well above consensus of $10.6 billion,” with $8.7 billion free cash flow, Jungwirth said..
While there were concerns by some analysts that ExxonMobil would be pressured in reaching some of its financial targets, that appears to no longer be the case because of rising commodity prices.
Jungwirth predicted ExxonMobil would hit its $10-20 billion debt repayment target by mid-2022 or before, with net debt to capitalization of less than 20% by the middle of next year.
Tudor, Pickering, Holt & Co. analyst Matt Murphy noted that the earnings forecast is ahead of Wall Street estimates of $1.41/share. He also pointed to profits of around $1.57 at the midpoint.
“In the upstream segment, a further strengthening of commodity markets, along with a lighter slate of maintenance in the quarter, are expected to be offset to some degree by mark-to-market derivative impacts, with upstream results estimated in the $4.3 billion range,” Murphy said.
Meanwhile, “significant margin improvement and a lighter maintenance schedule versus the second quarter are expected to drive downstream earnings of $870 million at the midpoint.”
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