- By Anayo Ezugwu
WITH improved performance in the upstream and downstream earnings, ExxonMobil Corporation has announced estimated third quarter 2017 earnings of $4 billion, or $0.93 per diluted share, compared with $2.7 billion a year earlier. The company recorded 50 percent increase in earnings through solid business performance and higher commodity prices.
Darren Woods, chairman and chief executive officer, ExxonMobil, said the improved earnings are a step forward in the plan of the company to grow profitability. “For the fourth-consecutive quarter, we generated cash flow from operations and asset sales that more than covered our dividends and net investments in the business,” he said.
According to the report, upstream earnings rose to $1.6 billion as commodity prices increased. Building on its recent success in deepwater exploration, such as the Turbot discovery in Guyana, ExxonMobil added 12 offshore blocks in Brazil, capturing acreage with high resource potential and competitive fiscal terms.
For the downstream, the results increased to $1.5 billion, despite Hurricane Harvey which reduced earnings by an estimated 4 cents per share. The absence of favourable asset management gains of $380 million in the prior year from the sale of Canadian retail assets. These results were achieved as the company worked quickly to safely bring refineries back online following the storm and to restore product supplies.
Chemical earnings were $1.1 billion, down slightly from a year ago on lower commodity margins and hurricane impacts, partially offset by volume growth. During the quarter the company enhanced its position to capture growing demand in Asia by completing the purchase of an aromatics plant in Singapore.
The third quarter report highlight has showed that ExxonMobil signed a production sharing contract for Block 59 located 190 miles (305 kilometres) offshore Suriname. The deepwater block has an area of 2.8 million acres and significantly expands the corporation’s operated acreage in the Guyana-Suriname basin. During the quarter, ExxonMobil announced it added 22,000 acres since May to its Permian Basin portfolio through a series of acquisitions and acreage trades. Located in the Delaware and Midland Basins, the new acreage adds over 400 million oil-equivalent barrels to the company’s existing Permian Basin resource base of 6 billion oil-equivalent barrels.
ExxonMobil completed the acquisition of one of the world’s largest aromatics facilities, located in Singapore, from Jurong Aromatics Corporation Pte Ltd. The acquisition will provide operational and logistical synergies between the plant and ExxonMobil’s integrated refining and petrochemical complex, as well as increase ExxonMobil Singapore’s aromatics production to over 3.5 million metric tons per year.
As part of its annual planning and budgeting cycle which is completed in the fourth quarter each year, the corporation develops crude and natural gas price outlooks as well as estimates of future costs and other factors necessary to complete its plan. Management’s price outlook and other factors, including factors such as operating costs, resource productivity, and capital efficiency, are re-assessed when facts and circumstances warrant but no less often than annually.
To the extent any impairment testing may be required management uses assumptions that are reasonable in relation to these factors in developing estimates of future cash flows. An asset group would be impaired if its estimated undiscounted cash flows were less than the asset’s carrying value, and impairment would be measured by the amount by which the carrying value exceeds fair value.
Development of future undiscounted cash flow estimates requires significant management judgment, particularly in cases where an asset’s life is expected to extend decades into the future, and an important component of the estimate is management’s outlook on prices and other factors as noted above.
The corporation has identified emerging trends such as increasing estimates of available natural gas supplies and ongoing reductions in costs of supply for natural gas. In the fourth quarter of 2017, the corporation will incorporate the impacts of these trends and the resulting lower price outlook in its annual planning and budgeting cycle. Once complete, the corporation expects to perform an impairment assessment for its North American natural gas asset groups utilizing the information developed as part of the planning and budgeting process.
It is not practicable at this time to estimate the impact these trends would have on the undiscounted cash flows for individual asset groups or any resulting impairment charges. However these trends are likely to place the corporation’s North American natural gas asset groups at risk for potential impairment. The corporation will complete its analysis of relevant factors as discussed above and perform any necessary impairment testing in connection with the preparation of the corporation’s year-end financial statements.
– Nov 3, 2017 @ 11:42 GMT |