Exxon, the largest oil company in the United States, has announced better-than-expected earnings for the fourth quarter. The company’s stock advanced by 1.1% in premarket trading, reaching $103.55.
Exxon Mobil reported adjusted earnings per share of $2.48, surpassing the consensus estimate on FactSet of $2.20. However, earnings for the year totaled $36 billion, a decrease of approximately 35% compared to the record profits of 2022.
Despite this decline, the company returned an impressive $32.4 billion to shareholders through share buybacks and dividends last year. CEO Darren Woods emphasized the company’s consistent strategy and execution excellence, which enabled them to deliver industry-leading earnings and provide greater cash returns to shareholders in 2023.
Anticipated Decline in Earnings
Investors are not solely focused on Exxon Mobil’s earnings numbers for the fourth quarter. The company is currently in a growth phase, but it is expected that its earnings will show a year-over-year contraction of around 35%. This downturn can be attributed to declining oil and gas prices, as well as write-downs of assets in California according to a regulatory filing in January.
Analysts predict that Exxon will earn $2.20 per share from $90 billion in revenue in the fourth quarter, as opposed to $3.40 per share from $95 billion in revenue during the same period last year. The recent slump in the stock price – approximately 14% below its record highs from the previous year – suggests that the anticipated decline in earnings has already been factored into investors’ expectations.
Exxon’s Growth Plans Set to Double Earnings by 2027
Exxon investors are eagerly anticipating the release of the company’s growth plans, as they project a promising future with the potential to double earnings by 2027. However, there are two key areas of concern that remain uncertain.
Regulatory Challanges for Exxon’s Acquisition of Pioneer Natural Resources
Back in October, Exxon entered into an agreement to acquire Pioneer Natural Resources, a move that would make it the largest oil producer in the Permian Basin spanning Texas and New Mexico. Nevertheless, the Federal Trade Commission has requested further details about the transaction, raising the possibility of regulatory challenges.
The Dispute Over Offshore Wells in Guyana
Exxon intends to significantly increase production from offshore wells in Guyana, which are estimated to hold billions of barrels of oil. However, the situation is complicated by Venezuelan President Nicolás Maduro’s claim that Venezuela owns a portion of the acreage off Guyana. Maduro has recently escalated his rhetoric and conducted military exercises near the disputed area. While Exxon maintains that Maduro’s claims do not affect its plans for Guyana, investors may seek more information regarding the severity of this threat.
Potential Dividend Increase for Exxon
In addition to these concerns, there may be pressure on Exxon to raise its dividend once again following Shell’s announcement on Thursday of a payout hike. Currently, Exxon stock yields 3.7%, making it an attractive option for income-seeking investors.
For more details about Exxon’s growth plans and the impact of these uncertainties, stay tuned for their upcoming release before the market opens on Friday.
