Last week Exxon Mobil released its Q3 earnings, and despite a huge drop-off due to the current state of the oil market, it’s coping quite well. Let’s take a look at some of the highlights:
- Earnings per share came in at $1.01, beating analysts’ estimated by $0.12, but down 46.6% from this time last year.
- Revenue came in at $67.34 billion, a 37.1% decline year over year, but beating the consensus by a whopping $3.59 billion, or 5.3%.
- Capital spend was down to $7.67 billion from $9.837 billion last year.
- Oil-equivalent production was up 2.3% year over year, while liquids were up 13% and natural gas was down 10%.
As you can guess, the company’s stock reacted nicely to the news, seeing a 3.5% bump since last Friday’s report. In fact, Credit Suisse, which has been on the sell side of Exxon Mobil, increased its price target from $67 to $72 after the news hit, proving that despite the oil giant’s trials and tribulations with the oil market, it has executed well. Of course, $72 is still lower than its current position at $85, so take that with a grain of salt.
Exxon Mobil prepared for the worst
Looking past the numbers from a short-term trading perspective, Exxon Mobil is in a good place right now, considering the external factors that are plaguing the energy sector. Its operational cash flow is 129% of its capital expenditures with decreasing its capital expenditures by only 16%. Taking a look at its top competitors, they’re not doing as well.
Chevron, for example, has cut back on its capital expenditures by 13% in the last year and its cash flow is covering only 68% of it all. BP, on the other hand, cut its capital expenditures by 19% and its cash flow is still only covering 98% of its pressing costs.
What this says to me is that Exxon Mobil can be profitable for the long haul, even with longstanding oil prices. Of course, that doesn’t necessarily merit an $85 share price, but it does show that the company is far better equipped than its competitors to weather the oil market storm and thus is in a great position to take off when the market eventually rebounds.
There’s something beyond oil prices Exxon Mobil may need to worry about in the near future, however. According to a New York Times editorial, the energy company has been accused of funding research that denies the reality of climate change. With some environmental advocacy groups comparing Exxon Mobil to tobacco companies that funded internal research showing the danger of cigarette smoke, but publicly denying it.
Exxon Mobil vehemently denies the allegations, saying it has published its research to the public for the last four decades, but several Democrat politicians have called for an investigation. The issue is certain to become a politically charged situation given the diverging opinions of Republicans and Democrats on the issue. As far as what this means for Exxon financially, some have pointed to the billions of dollars in fines that were levied against the tobacco companies for their infractions. It’s too soon to say whether Exxon Mobil finds itself in a similar situation, but it’s certainly reason to worry.