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EXXON MOBIL CORP (XOM) Q4 2013 Earnings Summary

Executive Summary

  • Q4 2013 EPS of $1.91 on net income of $8.35B; revenues $110.86B. EPS fell 13% and revenues declined 3.4% year over year; sequential EPS rose versus Q3 ($1.79) as Chemical strength and asset-sale gains offset weaker refining margins .
  • Segment mix: Upstream earnings $6.79B (-$0.98B YoY) on lower liquids realizations and volume/mix; Downstream $0.92B (-$0.85B YoY) on weaker refining margins; Chemical $0.91B (-$0.05B YoY) remained resilient; Corporate & financing expense improved YoY .
  • Capital returns and cash: $3.0B of share repurchases in Q4; $12.0B cash flow from operations and asset sales (CFO $10.2B + asset sales $1.8B). Management anticipates ~$3B of buybacks in Q1 2014, a clear near‑term catalyst .
  • 2014 watch items: Groningen curtailment (~100 mmcfd net vs a “normal” year) and expiration of the Abu Dhabi onshore (ADCO) concession (~140 kbpd net) present volume headwinds; management characterizes Groningen profitability as “bottom half” of portfolio (tempering earnings impact) .

What Went Well and What Went Wrong

What Went Well

  • Chemical resilience: Chemical earned $910M (down just $48M YoY) with higher volumes (+176 kt YoY) and continued strong U.S. gas-cracking economics; management noted U.S. plants “running flat out” and healthy export margins .
  • Integration and logistics optimization: U.S. refining benefited from slate optimization and winter-grade butane blending; despite ~$250M negative price timing in U.S. downstream, logistical flexibility across pipelines/rail/barge mitigated pressure .
  • Capital returns and balance sheet discipline: Q4 share purchases of $3.0B; dividends per share $0.63 (+11% YoY). 2013 distributions totaled $26B (dividends + buybacks) .

What Went Wrong

  • Downstream margin pressure: Downstream earnings fell to $916M (-$852M YoY) on weaker refining margins (–$680M YoY factor) and higher opex/FX; Europe/Asia-Pacific remained weak, with major turnarounds (e.g., Antwerp) also impacting volumes .
  • Upstream earnings decline: Upstream profit fell to $6.79B (–$976M YoY) with unfavorable volume/mix (–$550M YoY factor) and lower liquids realizations; total oil‑equivalent production down 1.8% YoY (4,216 koebd) .
  • Asset-sale dependence: Q4 asset sales proceeds $1.8B contributed ~$1.0B to earnings (vs ~$0.6B in Q4’12), cushioning core margin pressures; reliance on divestments clouds underlying run‑rate .

Financial Results

Summary P&L (YoY)

MetricQ4 2012Q4 2013
Total revenues and other income ($USD Billions)$114.70 $110.86
Net income attributable to ExxonMobil ($USD Billions)$9.95 $8.35
Diluted EPS ($)$2.20 $1.91
Net income margin (%)8.7% (calc. from )7.5% (calc. from )

EPS and Net Income (Sequential and YoY)

MetricQ4 2012Q2 2013Q3 2013Q4 2013
EPS (diluted, $)$2.20 $1.55 $1.79 $1.91
Net income attributable ($USD Billions)$9.95 $6.86 $7.87 $8.35

Segment Earnings

Segment ($USD Millions)Q4 2012Q3 2013Q4 2013
Upstream – U.S.1,604 1,050 1,186
Upstream – Non‑U.S.6,158 5,663 5,600
Upstream – Total7,762 6,713 6,786
Downstream – U.S.697 315 597
Downstream – Non‑U.S.1,071 277 319
Downstream – Total1,768 592 916
Chemical – U.S.728 680 808
Chemical – Non‑U.S.230 345 102
Chemical – Total958 1,025 910
Corporate & financing(538) (460) (262)
Net income attributable9,950 7,870 8,350

KPIs and Operating Metrics

KPIQ4 2012Q3 2013Q4 2013
Liquids production (kbd)2,203 2,199 2,235
Natural gas production (mmcfd)12,541 10,914 11,887
Oil‑equivalent production (koebd)4,293 4,018 4,216
Refinery throughput (kbd)4,837 4,847 4,452
Petroleum product sales (kbd)6,108 6,031 5,994
Chemical prime product sales (kt)5,901 6,245 6,077

Cash Flow, Capex, Returns

MetricQ4 2012Q3 2013Q4 2013
Net cash provided by operating activities ($G)13.2 13.4 10.2
Proceeds from asset sales ($G)0.8 0.2 1.8
CFO + asset sales ($G)14.0 13.6 12.0
Capital & exploration expenditures ($M)12,443 10,546 9,924
Share repurchases to reduce shares outstanding ($B)——3.0

Guidance Changes

Metric/ItemPeriodPrevious GuidanceCurrent Guidance/UpdateChange
Share repurchases to reduce shares outstandingQ1 2014—~$3B anticipatedNew disclosure
Groningen gas production curtailment (Netherlands)2014—~100 mmcfd net reduction vs “normal” year; ~20% vs 2013 (weather-driven high)New regulatory headwind
Abu Dhabi onshore (ADCO) concession statusEffective Jan 10, 2014Participating; ~140 kbpd netConcession expired; no longer participatingExit/volume headwind
Dividend (quarterly)Q4 2013$0.57 (Q4’12)$0.63+11% YoY (historical)
Capex outlook2014+Indicated roll-over in March Analyst DayNo numerical update on this call; update to come in MarchMaintained approach

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2013)Previous Mentions (Q3 2013)Current Period (Q4 2013)Trend
LNG project pipeline (PNG, U.S. Gulf, Canada, Alaska, Sakhalin)Broad LNG options; pending U.S. non‑FTA permit; Canada resource base strong Rich LNG option set; PNG on schedule; evaluating expansions; U.S. permit pending PNG LNG ahead of schedule to 3Q first deliveries; Alaska LNG site selected; Tanzania resource 17–20 Tcf in place Positive execution; multiple catalysts
Upstream liquids growth vs gas declineRamping U.S. liquids; 85% rigs in liquids; pad drilling gains Inflection toward liquids; lower downtime; delivering project wedge Liquids volumes +3% ex. OPEC/entitlements/divestments; Groningen/ADCO headwinds for 2014 Mix improving; external headwinds
Downstream margins/operationsHeavy turnarounds (most in 5 years) suppress throughput; recovery expected 2H More “normal” turnaround load; margins mixed; optimization ongoing Weaker refining margins; ~($250M) U.S. price timing headwind; optimization helped Cyclical softness; active mitigation
Chemicals cycle and U.S. advantageSingapore ramp not material; U.S. demand improving Strong U.S. gas-cracking; Asia/Europe weak margins U.S. plants running hard; Chemical earned $0.91B; Asia/Europe still weak Resilient segment; regional divergence
Capital returns/buybacksStrong buybacks; sourcing from asset sales as well ~$3B buybacks per quarter; balance sheet leverage up modestly $3B Q4 buybacks; ~$3B guided for Q1 2014 Continued capital return
Regulatory/policyRFS/RINs not material to results; blend wall concern —Free‑trade advocacy incl. crude/LNG exports Policy stance reiterated

Management Commentary

  • Strategy and execution: “Disciplined use of capital, project execution and asset management are positioning the company to deliver sustained superior financial performance across the business cycle.” — Rex W. Tillerson .
  • Capital returns: “The Corporation distributed $26 billion to shareholders in 2013 through dividends and share purchases to reduce shares outstanding.” .
  • Groningen impact measured: “If implemented…the impact on us relative to a normal year is about 100 MCF a day…unit profitability is in the bottom half of our portfolio.” — David Rosenthal .
  • U.S. Downstream optimization: “We are…using all logistics opportunities…pipelines, rail, barge…[and]…about $250 million of negative price timing effects [in Q4].” — David Rosenthal .
  • Free trade stance: “We fully support free markets, free trade…[and] strongly support unrestricted LNG exports.” — David Rosenthal .

Q&A Highlights

  • 2014 volume headwinds and offsets: Groningen curtailment (~100 mmcfd net vs normal), ADCO onshore exit (~140 kbpd net) noted; management highlighted portfolio flexibility and relatively low unit profitability of Groningen reducing earnings impact .
  • Project ramps: Kearl achieved 100kbd rates on trains but working on reliability; Kashagan remains shut pending root‑cause analysis; PNG LNG ahead of schedule to 3Q first deliveries .
  • Downstream dynamics: U.S. negative price timing (~$250M) and weak Europe/Asia; optimization of crude slates/logistics partly offset margins .
  • Asset sales: ~$1.0B Q4 gain on $1.8B proceeds (Upstream ~$775M; Downstream ~$225M), above ~$0.6B gain in Q4’12 .
  • Capital returns/philosophy: Q1 2014 buybacks anticipated ~$3B; dividends to grow over time; buybacks flex with cash generation and capital structure objectives .

Estimates Context

  • S&P Global consensus (EPS, revenue) for Q4 2013 could not be retrieved due to data access limits at the time of analysis; therefore, comparisons versus Wall Street consensus are unavailable at this time. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • Q4 print was stable operationally: EPS improved sequentially on Chemical strength and optimization, but YoY comps were pressured by refining margins and Upstream volume/mix; expect near‑term estimate stability absent consensus inputs .
  • 2014 production headwinds (Groningen, ADCO) are more volumetric than earnings‑dilutive given economics; watch March Analyst Day for updated production/capex trajectory .
  • Capital returns remain firm: ~$3B buybacks guided for Q1 2014 with dividend growth underpinning TSR; monitor asset-sale cadence given Q4’s ~$1.0B gain contribution .
  • Chemicals is a relative outperformer, benefiting from U.S. feedstock advantage; cyclical recovery in Europe/Asia would be upside to segment earnings .
  • Downstream margins remain cyclical; integrated logistics and slate management mitigate downside—watch U.S. price timing effects and European turnaround cadence .
  • LNG pipeline offers multi‑year catalysts (PNG expansion, U.S. Gulf, Canada, Alaska, Sakhalin); advancing permits and FIDs could re‑rate medium‑term growth visibility .

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