ExxonMobil’s full year earnings fell by more than half of $7.8 billion in 2016
| By Anayo Ezugwu | Feb 13, 2017 @ 01:00 GMT |
FOLLOWING the drop in the price of oil at the international market, ExxonMobil has recorded a big drop in its fourth-quarter 2016 earnings. The company’s net income in the fourth-quarter plunged 39.6 percent to $1.7 billion, while full year earnings fell by more than half to $7.8 billion.
An asset recoverability review was completed in the fourth quarter and resulted in a U.S. upstream asset impairment charge of about $2 billion mainly related to dry gas operations with undeveloped acreage in the Rocky Mountains region of the U.S. Excluding the impairment charge, full year earnings were $9.9 billion compared with $16.2 billion a year earlier, reflecting lower commodity prices and refining margins.
The Fourth quarter earnings were $1.7 billion, including the impairment charge recorded during the period. Excluding the impairment charge, earnings of $3.7 billion were up from the $2.8 billion reported in the fourth quarter of 2015, due to higher liquids realizations partly offset by weaker refining margins.
Darren W. Woods, chairman and chief executive officer, ExxonMobil, said, “ExxonMobil demonstrated solid operating performance in 2016. Financial results for the year were negatively impacted by the prolonged downturn in commodity prices and the impairment charge. The company’s continued focus on fundamentals and our ability to leverage an attractive global portfolio through our integrated business ensures we are well positioned to generate long-term shareholder value.”
The report made available to Realnews showed that ExxonMobil completed five major upstream projects during the year in Australia, Kazakhstan and the U.S., adding 250,000 oil-equivalent barrels per day of working interest production capacity. The company made three important new discoveries in Guyana, Nigeria and Papua New Guinea, and is growing its exploration portfolio, capturing 16 exploration blocks in 2016 with three additional awards to be finalized in 2017.
In the Downstream segment, ExxonMobil completed a 20,000-barrel-per-day crude expansion project at the Beaumont, Texas, refinery that increased the site’s flexibility to process domestic light crude oils. ExxonMobil is also advancing projects to increase production of higher-value fuels and lubricants, including investments at refineries in Belgium and the Netherlands.
The chemical business continued to capitalize on its liquids and gas cracking capabilities, capturing increased specialty and commodity product demand. The company is selectively investing to extend its advantage with projects that expand production capacity for ethylene and related products around the world. During 2016, the corporation distributed $12.5 billion in dividends to shareholders.
The comparison between the fourth quarter 2016 earnings and fourth quarter 2015 have showed that upstream earnings were a loss of $642 million in the fourth quarter of 2016, including an impairment charge of $2 billion mainly related to dry gas operations with undeveloped acreage in the Rocky Mountains region of the U.S.
Excluding the impairment charge, earnings were $1.4 billion, up $528 million from the fourth quarter of 2015. Higher liquids realisations partially offset by lower gas realisations increased earnings by a net $510 million. Lower volume and mix effects decreased earnings by $50 million. All other items, including lower expenses partly offset by the absence of favourable non-U.S. tax items from the prior year, increased earnings by $70 million.
On an oil-equivalent basis, production was down 127,000 barrels per day, or three percent, compared with the fourth quarter of 2015. Liquids production totalled 2.4 million barrels per day, down 97,000 barrels per day as field decline and lower entitlements were partly offset by increased project volumes, notably in Nigeria and Indonesia. Natural gas production was 10.4 billion cubic feet per day, down 179 million cubic feet per day from 2015 as higher project volumes were more than offset by field decline and lower entitlements.
U.S. upstream earnings were a loss of $2.3 billion in the fourth quarter of 2016, including an impairment charge of $2 billion. Excluding the impairment charge, earnings were a loss of $301 million, an improvement of $237 million from the fourth quarter of 2015. Non-U.S. Upstream earnings were $1.7 billion, up $291 million from the prior year period.
Downstream earnings were $1.2 billion, down $110 million from the fourth quarter of 2015. Weaker refining and marketing margins decreased earnings by $570 million, while favourable volume and mix effects increased earnings by $200 million. All other items increased earnings by $260 million as gains from divestments in Canada were partly offset by higher maintenance expense and unfavourable foreign exchange impacts. Petroleum product sales of 5.5 million barrels per day were down 173,000 barrels per day from the prior year mainly reflecting the divestment of refineries in California and Louisiana.
Earnings from the U.S. Downstream were $270 million, down $165 million from the fourth quarter of 2015. Non-U.S. Downstream earnings of $971 million were $55 million higher than prior year.
Chemical earnings of $872 million were $91 million lower than the fourth quarter of 2015. Margins decreased earnings by $10 million. Volume and mix effects decreased earnings by $30 million. All other items decreased earnings by a net $50 million due to unfavourable inventory effects. Fourth quarter prime product sales of 6.3 million metric tons were 175,000 metric tons lower than the prior year.
U.S. Chemical earnings of $352 million were $168 million lower than the fourth quarter of 2015. Non-U.S. Chemical earnings of $520 million were $77 million higher than prior year. Corporate and financing earnings of $209 million were $600 million higher than the fourth quarter of 2015 mainly reflecting favourable non-U.S. tax items.