EXXON MOBIL CORP (XOM) Q4 2014 Earnings Summary

Executive Summary

• Q4 2014 EPS of $1.56 beat consensus (FactSet) of $1.36, while revenue of $87.28B was slightly below the $87.43B consensus, reflecting upstream price pressure offset by strong Chemical margins .
• Downstream U.S. refining was “marginally negative” in Q4, burdened by a negative crude lag of just over $600M and heavy Gulf Coast maintenance; Chemical performance provided a partial offset .
• Management highlighted disciplined capital allocation: Q4 share repurchases were $3.0B, and 2015 CapEx was signaled “under $37B” with further detail at the March Analyst Day .
• Near‑term narrative catalysts: buyback pacing flexibility, cost capture across services/rigs, LNG contract lag dynamics, Russia sanctions posture, and mid‑40% effective tax rate guidance .

What Went Well and What Went Wrong

What Went Well

• Integrated model resilience and Chemical strength: “Fourth quarter earnings were $6.6 billion… Lower commodity prices in the Upstream and higher planned maintenance costs in the Downstream were partially offset by improved Chemical margins” .
• Cost discipline and CapEx efficiency: “We expect to lead the cost curve in capturing savings especially in downturns… we had signaled a further reduction in CapEx to under $37 billion in 2015” .
• Volume adds from projects and Lower 48 liquids: Sequential project volumes up ~130K boe/d (Angola, Kearl, PNG LNG, Malaysia) plus robust Lower 48 liquids drilling; base decline ~3% offset by projects/work programs .

What Went Wrong

• U.S. refining softness: Q4 downstream earnings were impacted by lower realized margins, negative crude lag, and heavy maintenance; U.S. refining earnings were “marginally negative” for the quarter .
• FX and PSC complexity: FX was a slight hurt in Q4 (~$<50M) vs sequential help (> $200M); PSC effects complicate price sensitivities, though lower oil generally aids entitlements .
• Sanctions overhang: Russia JV activities remained constrained with compliance requirements (Kara Sea/Arctic/Black Sea), injecting uncertainty into long‑term exploration plans .

Financial Results

Q4 vs estimates (S&P Global consensus unavailable; using FactSet via MarketWatch and CNBC):

Segment earnings (Q4 2014):

Selected KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Cost leadership and CapEx discipline: “We expect to lead the cost curve in capturing savings… we had signaled a further reduction in CapEx to under $37 billion in 2015” .
• Buyback pacing: “The buyback pace has been determined each quarter… we remain committed to our investment program and… paying our growing dividend” .
• U.S. refining quarter dynamics: “Fourth quarter… impacted by lower realized refining margins and a negative crude lag… heavy maintenance… earnings were marginally negative” .
• FX impact: “In quarter-on-quarter it was a slight hurt to earnings of under $50 million although sequentially, it actually was a positive of over $200 million” .
• Crude lag magnitude: “In the fourth quarter absolute it was just over $600 million… primarily in U.S.” .
• Balance sheet flexibility: “We have significant debt capacity… we’ll maintain our financial flexibility” .
• Tax rate guidance: “Our guidance of our effective tax rate is… about the mid 40%” .

Q&A Highlights

• Capital allocation: Multiple questions probed CapEx flexibility and buyback pacing; management reiterated investment discipline, cost capture, and willingness to leverage balance sheet prudently .
• Downstream performance: Analysts focused on U.S. refining underperformance vs peers; management detailed crude lag, margin pressure, and maintenance impacts .
• PSC and LNG pricing: Clarified PSC dynamics (no simple sensitivity) and crude‑linked lags in LNG contracts with variability by contract .
• Russia/Sanctions: Confirmed compliance; highlighted Arkutun‑Dagi start‑up success; broader Russian JV activities await sanction evolution .
• Operational volumes: Sequential project adds ~130K boe/d; Lower 48 liquids momentum and rig activity .

Estimates Context

• S&P Global consensus data was unavailable to retrieve during this session; we use FactSet/press reports as proxies. Q4 2014 EPS of $1.56 vs FactSet consensus $1.36 (beat), revenue $87.28B vs $87.43B (slight miss) . The EPS beat likely reflects Chemical strength and integration offsets; the revenue shortfall is consistent with upstream price declines.

Key Takeaways for Investors

• Strong EPS beat despite commodity pressure underscores integrated model resilience; position sizing can lean into Chemical/Downstream support during oil downcycles .
• Expect near‑term buyback moderation and tightened CapEx (<$37B) as cash preservation levers; watch March Analyst Day for quantified 2015 spend and project ramp detail .
• U.S. refining earnings likely to rebound as crude lag normalizes and maintenance rolls off; monitor margin trends and schedule cadence in Gulf Coast assets .
• LNG exposure is mostly long‑term contracted and crude‑linked; pricing impacts will show with lag—track 1H15 realizations and contract reopeners .
• Balance sheet flexibility intact (AAA focus); opportunistic M&A or bolt-ons possible, but only if accretive to returns and portfolio quality .
• Tax rate settling in mid‑40% range supports earnings normalization modeling; factor FX offsets across segments .
• Russia remains a strategic long‑term resource option but constrained under sanctions; current contribution via Sakhalin‑1 and Arkutun‑Dagi ramp .