Exxon 1Q Profits Double Despite $3.4B Charge From Sakhalin Exit
U.S. supermajor ExxonMobil has announced estimated first-quarter 2022 earnings of $5.5 billion, slightly higher than the prior quarter.
First-quarter earnings of $5.5 billion compared with $8.9 billion in the fourth quarter of 2021 and compared to $2.7 billion in the first quarter of last year. Excluding identified items, earnings of $8.8 billion were slightly higher than the prior quarter, as higher industry prices and margins and reduced expenses were largely offset by a temporary reduction in volumes, unfavorable mark-to-market derivative effects, and price timing impacts.
“The quarter illustrated the strength of our underlying business and significant progress in further developing our competitively advantaged production portfolio,” said Darren Woods, chairman and chief executive officer. “Earnings increased modestly, as strong margin improvement and underlying growth were offset by weather and timing impacts. The absence of these temporary impacts in March provides strong, positive momentum for the second quarter.”
First-quarter cash increased by $4.3 billion compared to the fourth quarter of 2021, as strong cash flow from operations more than funded capital investment, additional debt reduction, and shareholder distributions in the quarter. Free cash flow in the quarter was approximately $11 billion.
With the balance sheet well within the targeted debt-to-capital range of 20-25%, the company initiated its previously announced $10 billion buyback program, repurchasing shares totaling $2.1 billion during the quarter. The company has increased this program and now expects to repurchase up to a total of $30 billion through 2023.
In the first quarter, the company formed ExxonMobil Product Solutions, combining world-scale Downstream and Chemical businesses, and centralized Technology & Engineering and Operations & Sustainability groups. This new integrated business will be focused on high-value products, improving portfolio value, and leading in sustainability. The new centralized organizations will fully leverage functional expertise and quickly deploy best practices across the globe.
Exxon said that its oil-equivalent production was 3.7 million barrels per day, down 4% from the fourth quarter of 2021 due to weather-related unscheduled downtime, planned maintenance, lower entitlements associated with higher prices, and divestments. Excluding entitlement effects, government mandates, and divestments, oil-equivalent production was down 2%.
Exxon stated that it was discontinuing operations at the Sakhalin-1 venture. In the first quarter, the company recorded a charge of $3.4 billion related to its investment in the project.
In February, the company started production at its second major development offshore Guyana. The successful start-up of the Liza Phase 2 development brought total production capacity to more than 340,000 barrels per day and made a final investment decision for the Yellowtail development in early April.
Yellowtail will be the company’s fourth and largest development to date in Guyana with a production capacity of 250,000 barrels of oil per day. It is expected to begin production in 2025. Additionally, Payara FPSO construction is running approximately five months ahead of schedule with start-up likely before year-end 2023.
ExxonMobil further focused its work on LNG by commissioning the Area 4 Coral South FLNG project in Mozambique, with first production expected this year. The company signed the P’nyang Gas Agreement in Papua New Guinea. Additionally, construction of the Golden Pass liquefaction facilities on the U.S. Gulf Coast remains on schedule.
Moving towards net-zero
In January, Exxon announced its ambition to achieve net-zero greenhouse gas emissions from operated assets by 2050. This ambition applies to Scope 1 and 2 greenhouse gas emissions and builds on the company’s 2030 emission-reduction plans.
The company reached a final investment decision to expand carbon capture capacity at its facility in LaBarge, Wyoming, adding up to 1.2 million metric tons to the nearly 7 million metric tons already captured at LaBarge each year.
Also, ExxonMobil announced plans for its first world-scale blue hydrogen plant in Baytown, Texas. The proposed plant would produce up to 1 billion cubic feet per day of blue hydrogen and include one of the world’s largest carbon capture and storage projects, doubling the company’s industry-leading carbon capture capacity and providing a potential anchor for the ambitious Houston Industrial Hub emissions reduction project.
Earlier this month, ExxonMobil began selling commercial volumes of certified natural gas after MiQ, an independent validator, certified the company’s assets in the Permian Basin with an "A" grade – the highest recognition possible – for its methane and emissions-reduction processes and technology applications. The company plans to expand the certification process to other operations in the United States.
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