Exxon Mobil - Q4 2011 Earnings

By Eric Fox | February 03, 2012 AAA

Exxon Mobil (NYSE:XOM) reported solid profit in the fourth quarter of 2011, as the largest oil and gas company in the world continues to reap the benefits of high global oil prices. (To know more about oil and gas, read Oil And Gas Industry Primer.)
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Fourth Quarter of 2011
Exxon Mobil reported earnings of $9.4 billion in the fourth quarter of 2011, up 2% from the corresponding quarter of 2010. On a per share basis the company reported $1.97 per diluted share in the fourth quarter of 2011, up 6% over last year. The company earned most of its profit in the upstream segment, which accounted for 94% of its $9.4 billion in net income.

Exxon Mobil spent $10 billion in capital during the fourth quarter of 2011, bringing expenditures for the full year to $36.8 billion. Other companies that spent large amounts of capital in 2011 include Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP) which spent $29.1 billion and $12.7 billion, respectively.

Capital
Exxon Mobil maintained the company's aggressive share repurchase program during the fourth quarter of 2011. The company expended $5.4 billion to purchase 69 million shares of its common stock during the quarter, and anticipates a similar repurchase program in the first quarter of 2011.

Exxon Mobil also paid a quarterly dividend of 47 cents per share in the fourth quarter of 2011, returning an additional $2.25 billion to shareholders.

Another energy company that is involved with a repurchase program is Marathon Oil (NYSE:MRO), which recently authorized a $2 billion program over the next two years.

Natural Gas Drilling Cuts
One topic of interest during the earnings conference call held by Exxon Mobil was the company's plans regarding natural gas drilling and production in the United States. The company produced 4.0 Bcf of natural gas per day in the U.S. during the fourth quarter of 2011, up from 3.87 Bcf per day in the same quarter of 2010.

Management said that the company has not shut in any dry gas production so far in response to the drop in natural gas prices, and is currently operating between 65 to 70 rigs in various natural gas plays across its portfolio. Although the company's rig count has been stable, Exxon Mobil has shifted many of these rigs from areas that produce only natural gas to ones that also produce natural gas liquids in the production stream.

Exxon Mobil is bullish on natural gas in the long term and expects an increase in global demand for this commodity to eventually improve fundamentals. The company published "The Outlook For Energy" in late 2011 and estimated that this commodities share of the entire energy mix will increase by a 1.6% annual rate through 2040, and displace coal as the second most popular fuel used globally.

The Bottom Line
Exxon Mobil's enormous profit in the fourth quarter of 2011 should not have come as a surprise to most investors, as the world's largest energy company harvests the rewards of stubbornly high prices for oil across the globe. (For additional reading, check out A Guide To Investing In Oil Markets.)

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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