ExxonMobil says the impact of tax reform on the company’s earnings reflects the magnitude of its historic investment in the United States and strengthens the commitment to further grow business in the country
By Anayo Ezugwu
EXXONMOBIL Corporation earned an estimated $19.7 billion, or $4.63 per share assuming dilution in 2017, compared to $7.8 billion in 2016. The oil giant said the U.S. federal tax reform in the fourth quarter of 2017 resulted in a non-cash earnings gain of $5.9 billion, due to revaluation of deferred income tax balances.
Non-cash asset impairments of $1.5 billion were recorded during the year, mainly relating to assets in the upstream. The company also earned $8.4 billion in fourth quarter of 2017. Earnings excluding U.S. tax reform and impairments were $3.7 billion, or $0.88 per share assuming dilution, in the fourth quarter 2017, down two percent compared with the prior-year quarter.
Darren W. Woods, chairman and chief executive officer, ExxonMobil, said the impact of tax reform on the company’s earnings reflects the magnitude of its historic investment in the U.S. and strengthens the commitment to further grow business in the country. “We’re planning to invest over $50 billion in the U.S. over the next five years to increase production of profitable volumes and enhance our integrated portfolio, which is supported by the improved business climate created by tax reform,” he said.
ExxonMobil is investing billions of dollars to increase oil production in the Permian Basin in West Texas and New Mexico, expand existing operations, enhance infrastructure and build new manufacturing sites. These high-quality investments will create value for ExxonMobil shareholders while benefiting the economy, creating thousands of jobs and enhancing energy security.
It reported that fourth quarter upstream earnings were $8.4 billion, including $7.1 billion from U.S. tax reform and asset impairments of $1.3 billion. Fourth quarter earnings excluding U.S. tax reform and impairments increased $1 billion, to $2.5 billion, driven by higher prices as liquids realizations increased more than $10 per barrel.
Downstream earnings in the fourth quarter were $1.6 billion, including $618 million from U.S. tax reform. Earnings excluding U.S. tax reform and impairments declined $289 million, to $952 million, as the absence of last year’s Canada retail divestment gain of $522 million was partially offset by higher margins and asset management gains in the current quarter.
Chemical earnings were $1.3 billion in the fourth quarter. Excluding the $335 million impact from U.S. tax reform, Chemical earnings increased $63 million, or 7 percent, due to higher sales. Prime product sales of 6.8 million metric tons were the highest in a decade.
The full year 2017 highlights shows that cash flow from operations and asset sales was $33.2 billion, including proceeds associated with asset sales of $3.1 billion. It reported that capital and exploration expenditures were $23.1 billion, up 20 percent from 2016.
Oil-equivalent production was 4 million barrels per day, down 2 percent from the prior year. Excluding entitlement effects and divestments, oil-equivalent production was flat with the prior year. The corporation distributed $13 billion in dividends to shareholders.
Following the December 22, 2017, enactment of the U.S. Tax Cuts and Jobs Act and in accordance with U.S. GAAP, the corporation has included reasonable estimates of the income tax effects of the change in tax law and tax rate. These include amounts for the deferred income tax impact from the reduction in the corporate tax rate from 35 percent to 21 percent and the mandatory deemed repatriation of undistributed foreign earnings and profits.
ExxonMobil’s significant historical investments in the U.S. have created large deferred income tax liabilities that have reduced previously reported earnings. Re-measurement of these deferred income tax liabilities from the 35 percent rate to 21 percent results in a one-time non-cash benefit to earnings. The corporation has paid taxes on non-U.S. earnings at tax rates on average above the U.S. rate of 35 percent. As a result, the deemed repatriation tax is not a significant item for ExxonMobil.
As part of its 2017 annual planning and budgeting cycle, the corporation made a decision to cease development planning activities and further allocation of capital to certain non-producing assets outside the U.S. resulting in an after-tax charge in the fourth quarter of $807 million to reduce the carrying value of those assets.
In addition, and in part due to a reduction to the corporation’s long-term natural gas price outlooks, certain asset groups were subject to an impairment assessment. As a result of that assessment, the carrying values for certain asset groups in the U.S. were reduced to fair value, resulting in an after-tax charge of $481 million. The asset groups subject to this impairment charge are primarily dry gas operations with little additional development potential.
– Feb. 9, 2018 @ 13:25 GMT |