Lower costs to cover depreciation and depletion of resource reserves likely boosted earnings for Exxon Mobil Corp. (XOM), America's largest oil producer, in the first quarter while oil prices fell further from their 2022 highs.
- Exxon Mobil's first-quarter profit probably increased 20% from last year to $10.6 billion.
- Revenue is expected to decline year-over-year on lower oil prices.
- Depreciation and depletion expenses are forecast to decline by 44%, helping to offset lower revenue and boost earnings.
Exxon likely will say its first-quarter profit increased to $10.6 billion, or $2.60 per share, from $8.8 billion, or $2.07 per share, in the same quarter a year ago, according to estimates compiled by Visible Alpha. Earnings probably rose despite a marginal decline in revenue to $89.5 billion, down $1 billion from last year. Exxon will report earnings before markets open Friday.
Revenues were hit by a decline in crude oil prices from a year ago when they surged after Russia invaded Ukraine. Global benchmark Brent crude fell 15% to an average of $82.32 per barrel in the first quarter from $97.44 in last year's first quarter.
Although the oil price drop sapped the company's first-quarter revenue growth, an anticipated 44% decline in depreciation and depletion expenses probably will allow Exxon's earnings to increase. A year ago, Exxon recorded $8.9 billion in expenses in that line item, the second-highest in any quarter of the past decade. In the recently completed period, it's projected to fall to $4.9 billion, more typical quarterly depreciation and depletion costs.
As oil prices fell, the company's share price stayed flat in the first quarter. But it outperformed the 5% decline of the S&P 500 Energy Sector Index.
Refining Roller Coaster
Exxon's earnings also likely will reflect a substantial gain in processing margins in its refining business. Per-barrel margins are expected to almost double to $20.66 per barrel from $11.69 per barrel a year ago.
However, that margin would represent a decline from $32.36 per barrel since last year's second quarter. Amid global economic uncertainty and slowing inflation, analysts project the company's refining margin will keep declining every quarter through early next year, dropping to $11.27 per barrel by next year's first quarter.
|Exxon Mobil Key Metrics|
|Q1 2023 (est.)||Q1 2022||Q1 2021|
|Earnings per share ($)||2.6||2.07||0.65|
|Global refining margin per barrel ($)||20.66||11.69||6.16|
Meanwhile, upstream revenue—generally mirroring movement in oil prices—likely dropped 20% to $22.4 billion in the first quarter. Forecasts have it remaining near that level on a quarterly basis through next year.
Pretax income on downstream operations, however, likely totaled $4 billion, swinging from a $391 million loss in the same period a year ago. The company's downstream business has recorded unusually high income since the second quarter of last year.
However, pretax income in its chemical segment likely fell 73% to $472 million.
Visible Alpha. "Financial Data."
Federal Reserve. "Global Price of Brent Crude."