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Exxon posts best results in seven years on high oil prices

Randy Mancini 29 Feb 1
FILE PHOTO: Logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro
FILE PHOTO: A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018. REUTERS/Sergio Moraes

February 1, 2022

By Sabrina Valle

HOUSTON (Reuters) -Exxon Mobil Corp on Tuesday reported a fourth-quarter profit of $8.87 billion, its largest in seven years, as the top U.S. oil producer benefited from strong energy prices.

The company slashed spending after fuel demand cratered two years ago and, since then, earnings have topped pre-pandemic levels. On Monday, Exxon also disclosed a business shakeup to accelerate a $6-billion cut to operating expenses set in motion last year.

The revamping will “position us to lead in cash flow and earnings growth, operating performance, and the energy transition,” Chief Executive Darren Woods said in a statement.

Exxon reported a profit of $2.08 per share, above analysts’ forecast of $1.94 as the bottom line benefited from soaring oil and gas prices, higher volumes and asset sales. In the same quarter a year ago, Exxon posted an adjusted profit of 3 cents a share.

“ExxonMobil closed a tumultuous year with results that can be described as solid,” Peter McNally, Global Sector Lead for Industrials Materials and Energy at Third Bridge.

Shares were up 1.4% in pre-market trading. The stock closed Monday at its highest since July 2019 as oil prices topped $91 per barrel on worries over supplies and geopolitical tensions.

Oil and gas production, Exxon’s largest business, posted a $6.1 billion operating profit, the highest in two years. Earnings benefited from an 80% increase in oil prices and doubling of natural gas prices compared to 2020.

Even with a substantial spending increase into the end of the year to $17 billion, Exxon managed to use the extra proceeds from oil prices to reduce debt, said Biraj Borkhataria, Co-Head European Energy Research at RBC Capital Markets.

The company has eliminated the tab taken on during the 2020 downturn to keep paying dividends to shareholders. It has now returned to pre-pandemic debt levels, down $20 billion last year to $47.7 billion.

“We have been cautious on the Exxon investment case through the pandemic,” said Borkhataria. “But we believe the overall sector tailwinds are likely to outweigh company-specific factors in 2022.”

The company had flagged gains from asset sales and a $752 million, or 17 cents a share, hit to upstream results from impairment charges.

Its refining business posted fourth-quarter operating net of $1.4 billion, up sequentially and a big swing from a year ago when results were hurt by pandemic-related demand declines.

Chemical operating earnings were more than twice the profit a year ago when the business was hurt by the pandemic. Exxon said on Monday it would combine its refining and chemicals businesses.

(Reporting by Sabrina Valle, Editing by Nick Zieminski)