One of the world’s largest energy producers and oil giant, Exxon Mobil Corp., reported strong sales and nearly $10 million in profit last quarter, despite a 7.5 percent drop in productions.
The world’s largest publicly traded oil company, Exxon Mobil Corp. said it earned $9.57 billion, or $2.09 a share, last quarter, down from $10.33 billion, or $2.13 a share, down the same period a year earlier.
The dive in profit came as the company’s production fell 7.5 percent from this same period a year ago. One of the key reasons for the earnings drop was a lack of asset sales in the quarter, the company said. Sales in the third quarter of 2011 gave the company a $1 billion boost in earnings.
Irving, Texas-based Exxon saw its earnings per share amounted to $2.09, down from $2.13 from a year ago, the company said.
“Third quarter results reflect our ongoing commitment to help deliver the energy needed to underpin economic recovery and growth while maintaining our strong focus on safety and environmental performance,” CEO Rex Tillerson said in a statement.
Total revenue in the quarter decreased 7.7% year over year to $115.7 billion, but surpassed the Zacks Consensus Estimate of $110.0 billion.
Dr. Steven Bauer, who is a consultant and asset manager at Boutique Research Firm Financial Analyst, reported that at this time buying ExxonMobil stock is not recommended.
“Longer-term projected earnings growth for XOM indicates that it will be cycling from modestly positive to negative through 2015,” Bauer said. “The projected five year average earnings growth is a modest 2.0 percent to 3.7 percent.” Which Bauer believes is “not impressive.”
Exxon’s current stock price is roughly $90, which has been up considerably over the last two years. Their range in price within 52 weeks reached a low of $73 and a high of $93.
Capital and exploration expenditures were $9.2 billion in the third quarter and a record $27.4 billion for the first nine months of 2012 as Exxon says it will continue pursuing opportunities to find and produce new supplies of oil and natural gas to meet global demand for energy.
According to Exxon’s annual report, the company is “conducting [its] own research efforts into alternative energy, such as through sponsorship of the Global Climate and Energy Project at Stanford University and research into hydrogen fuel cells and fuel-producing algae.”
According to a poll by Generation Opportunity, 61 percent of Ohio Millennials would increase production of domestic American energy sources like oil, natural gas, and coal if given the opportunity to set America’s fiscal priorities.
Nevertheless a majority—55 percent– said that the government has a good deal of control over gas prices, while 44 percent said it doesn’t.
Exxon said its upstream earnings slumped by $2.42 billion to $5.97 billion, motivated by critical tax items and foreign exchange impacts.
Downstream earnings increased by $1.61 billion to $3.19 billion as earnings grew and volumes and mix effects were stagnant.
According to Zack’s Equity Research, “We believe that ExxonMobil is the world’s best-run integrated oil company given its track record of superior return on capital employed. The company boasts of diversified operations across the world with several new projects coming online through 2013.”
Damaged by lower margins, chemical earnings dropped $213 million to $790 million.
According to an analysis report by Global Data, Exxon Mobil expects global energy demand to increase by 30 percent by 2040, as compared to that of 2010 levels. In order to meet such growth in demand, the company intends to develop new supplies of energy, towards which, it plans to invest approximately $185 billion during 2012-2016.
Although this development of new energy could be positive to the environment and the economy, this development could lead to stricter regulations for deep offshore drilling, according to an annual report by Exxon. Like the US Gulf of Mexico oil spill in 2010, environmental rules and standards have changed drastically.
The analysis report states, “The U.S. Gulf of Mexico oil spill [had] a major impact on the future oil and gas policy of the US. The spills…lead to stricter environmental rules and standards for deep water offshore drilling.”
During the third quarter of 2012, the company purchased 58 million shares of its common stock for the treasury at a gross cost of $5.1 billion, Exxon said. These purchases included $5.0 billion to reduce the number of shares outstanding, with the balance used to acquire shares in conjunction with the company’s benefit plans and programs.
“The Corporation distributed $7.6 billion to shareholders in the third quarter through dividends and share purchases to reduce shares outstanding,” Tillerson said.
Share purchases to reduce shares outstanding are currently anticipated by Exxon to equal $5 billion in the fourth quarter of 2012.
Zack’s Equity Research finished their report by stating, “…we remain skeptical due to the company’s continued disappointing production trend, which decreased for five quarters in a row. We see ExxonMobil struggling to grow production volumes over time.”
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