ExxonMobil is scheduled to release its quarterly earnings report tomorrow, and along with many big names in the energy industry, the company is likely to see massive drops in revenue compared to last year's results. However, unlike some of its peers, the largest energy company in the Dow Jones Industrials could surprise some investors, as ExxonMobil earnings could buck the industry trend and actually grow from year-ago levels.
ExxonMobil is such a large company that even holding its own requires a huge amount of work to offset the natural declining production of aging wells. With no shortage of prospects, though, the company has done its best to keep production levels up and squeeze as much profit as possible from the opportunities that present themselves. Let's take an early look at what's been happening with ExxonMobil over the past quarter and what we're likely to see in its quarterly report.
Stats on ExxonMobil
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
How long can ExxonMobil earnings grow?
Despite having a fairly rosy outlook, analysts have cut back the pace of growth for ExxonMobil's earnings in recent months, cutting their June-quarter estimates by a nickel per share and their full-year 2013 consensus by a dime per share. The stock has done respectably well recently, rising more than 7% since late April.
Exxon has faced the same challenges that many large oil companies have had to deal with. In its first quarter, Exxon's global production of oil and nat-gas liquids fell 3.5%, as longtime oil-field holdings haven't been able to keep up their past production levels, let alone provide much-needed growth. The company is working hard to replace reserves to boost production, but newer unconventional resources come with much higher costs, hurting profit margins, even with oil prices at triple-digit levels.
But Exxon has high hopes for the prospects of natural gas. The company has spearheaded efforts to boost exports of liquefied natural gas, with the idea of capitalizing on much higher gas prices overseas than Exxon can reap domestically under current glut conditions. Yet even the promise of LNG exports hasn't kept other gas-heavy companies from shifting toward oil and liquids. Chesapeake Energy serves as an extreme example, having boosted oil production by 56% year over year while keeping growth in dry-gas production limited to just 2%. Similarly, Exxon is being realistic by projecting higher growth from liquids than from dry gas, but it still expects a roughly 1% annual contribution to growth from natural gas.
Moreover, Exxon has been looking at the ultra-deepwater oilfields of the Gulf of Mexico as a potential source of new reserves. Exxon has begun developing its Julia oil field in the Gulf, spending $4 billion and expectating to begin production in 2016. That puts Exxon behind rival Chevron , which has roughly 50% interests in two promising fields that should start producing next year, as well as continued development of other Gulf fields and its recent discovery in the Coronado region of the Gulf.
In tomorrow's ExxonMobil earnings report, watch to see how successful the company is in keeping margins up and making the most of its falling revenue. Exxon will have to stay vigilant to reduce expenses if it wants to stay as profitable as it has been for years.
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The article Will Tomorrow's ExxonMobil Earnings Satisfy Shareholders? originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Chevron. The Motley Fool has the following options: long January 2014 $30 calls on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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