ExxonMobil Posts Earnings Improvement Across All Segments

 ExxonMobil (XOM) reported a 69% rise in first-quarter earnings from the same period a year ago, thanks largely to higher oil and natural gas realizations. However, the earnings improvement was not confined to the upstream segment, as the downstream and chemical segments both reported robust earnings improvements from the first quarter last year. While only one quarter, we see the strength in each segment as supporting evidence of the value in ExxonMobil's integrated model.

Highlighting the strength of the refining market, downstream earnings increased to $1.1 billion in the first quarter compared with $37 million last year. The bulk of the improvement came in the United States, where ExxonMobil reported downstream earnings of $694 million compared with a loss of $60 million last year on only slightly higher throughput volumes. While the international downstream posted year-over-year gains, profit fell significantly from the fourth quarter. We hope to glean additional information as to why--and as to whether this is a market trend or operational issue--on Thursday's conference call. Chemical earnings increased 21% to $1.5 billion from the year before as improved margins helped to offset lower sales volumes and the absence of asset sales, which benefited last year's earnings.

Upstream earnings increased 49% to $8.7 billion from the year before, thanks to higher oil price realizations as well as greater production volumes. While U.S. upstream delivered the bulk of the production gains thanks to the addition of XTO volumes, the international upstream segment saw the greatest earnings improvement. Despite essentially flat volumes as a result of entitlement volumes and OPEC curtailments, the international segment posted a 57% increase in earnings thanks to greater exposure to oil. Meanwhile, the U.S. upstream segment registered earnings growth of only 17% despite total production growth of 76% as natural gas realizations fell from last year. We expect this dichotomy to continue until U.S. natural gas prices recover.

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