ExxonMobil Releases 1Q15 Results: Sharp Declines but Optimistic Future (Part 4 of 5)
Downstream margin rises
ExxonMobil’s 1Q15 downstream performance has improved. Its chemical segment also did relatively well in 1Q15 compared to the year-ago quarter.
In North America, increasing crude oil and natural gas production has led to lower raw material and energy costs. This has strengthened refining margins over the past few years. Also, ExxonMobil (XOM) benefited from demand improvement in a number of products like gas, distillate, and fuel oil.
In the chemical segment, net income in the United States declined 27%. The non-US chemical segment’s net income remained relatively steady, falling by 4% from 1Q14 to 1Q15. The fall in the chemical segment margin was primarily due to lower product price realization.
Crack spread increases in 1Q15
Crack spread increased during the first three months of 2015. It averaged $21.36 per barrel from January to March this year. In comparison, crack spread averaged $19 per barrel in 2014. Rising crack spread typically results in an increasing refinery margin.
The crack spread measures the difference between market prices for refined petroleum products and crude oil. The 3:2:1 crack spread reflects the difference between the cost of three barrels of crude oil and the price of two barrels of gasoline and one barrel of diesel.
Volume changes little
As you can see in the above graph, ExxonMobil’s (XOM) downstream and chemical production volume didn’t change significantly from 1Q14 to 1Q15. Refinery throughput increased ~1%, while chemical product sales decreased 1% during the same period.
In 1Q15, ExxonMobil’s net income declined 45.7% from 1Q14. During the same period, BP plc’s (BP) net income decreased 26%, and Royal Dutch Shell’s (RDS.A) held up well, falling by only 2%. BP is 4.9% of the iShares Global Energy ETF (IXC). ExxonMobil is 15.1% of the Energy Select Sector SPDR ETF (XLE).
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