ExxonMobil holds the line against energy pressures in 4Q14 (Part 3 of 10)
ExxonMobil’s 4Q14 revenues down
In the previous article, we discussed ExxonMobil’s (XOM) earnings versus analyst estimates. In this article, we’ll look at the company’s 4Q14 revenues and earnings and try to determine why they moved relative to the same period in 2013.
ExxonMobil recorded $87.28 billion in total 4Q14 revenues, down 21% from $110.86 billion recorded in 4Q13. For a long-term perspective, read A key analysis of ExxonMobil’s revenues.
In comparison, Chevron (CVX) revenues decreased by 19%, Royal Dutch Shell (RDS.B) revenues fell by 15.4%, and Hess Corporation’s (HES) revenues dropped 50.7% in 4Q14 compared to the same quarter a year ago. CVX and HES make up 15.1% of the Energy Select Sector SPDR ETF (XLE).
Why did revenues decrease?
ExxonMobil’s (XOM) revenues were down on decreased volume and lower crude oil price realization in the Upstream segment. The company’s crude oil, natural gas liquids, bitumen, and synthetic oil production volume fell 3.8% in 4Q14 compared to 4Q13. The expiry of its Abu Dhabi onshore concession had a negative effect on ExxonMobil’s 3Q14 production.
Abu Dhabi expiry reduces volumes
The company’s Abu Dhabi-based exploration and production activities benefited from an oil concession agreement executed in 1939. The concession expired in January 2014.
In 4Q14, ExxonMobil’s oil-equivalent production decreased 3.8%, to ~4.05 million barrels per day compared to 4.21 million barrels per day in 4Q13. Refinery throughput and petrochemical volume also decreased. Without the Abu Dhabi concession for liquid petroleum production, volumes fell by 133,000 barrels per day in 4Q14 compared to volumes from the same period a year ago.
Net income down but margin steady
Net income for 4Q14 decreased ~21% to $6.57 billion compared to $8.35 billion in 4Q13. The company’s net income margin remained unchanged at 7.5%.
Earnings from ExxonMobil’s (XOM) Upstream and Downstream business segments decreased in 4Q14, yet earnings from the Petrochemical segment improved. The US Downstream business took the steepest earnings hit, and net earnings there turned into a net loss. In the Upstream business, average price realization pressured earnings downward. The company benefited from higher margins in the Petrochemical segment, due mainly to better margins.
Despite falling revenues, 4Q14 earnings were boosted by two things:
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deferred income tax
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recognition of a favorable arbitration ruling for expropriated Venezuelan assets
These two factors contributed $1 billion to earnings in the latest quarter. For added context, read Why ExxonMobil’s win against Venezuelan government matters for US investors.