Exxon Mobil’s Earnings Facing Year-Over-Year Contraction

by Warren Seah

Exxon Mobil, despite being in growth mode, is anticipated to experience a contraction of about 35% in its fourth-quarter earnings. This decline can be attributed to the ongoing decrease in oil and gas prices as well as asset write-downs in California. As per regulatory filings in January, the company expects to have earned $2.20 per share from $90 billion in revenue during the fourth quarter, whereas the previous year saw earnings of $3.40 per share from $95 billion in revenue. The current state of the stock, down approximately 14% from last year’s record highs, suggests that this anticipated decline in earnings has already been factored into the stock price.

Shift in Investor Focus to Growth Plans

Considering the aforementioned decline, investors will be less concerned with the earnings numbers and more interested in Exxon’s strategic growth plans. According to the company, these plans are expected to lead to a doubling of earnings by 2027 compared to 2019 levels. Notably, there are two particular aspects of this plan that remain somewhat uncertain, thus warranting attention from investors.

Exxon’s Acquisition and Potential Regulatory Challenges

In October, Exxon entered into an agreement to acquire Pioneer Natural Resources, a move that would establish Exxon as the largest oil producer in the Permian Basin of Texas and New Mexico. However, the Federal Trade Commission has requested more information regarding the transaction, which introduces the possibility of regulatory challenges.

Venezuela’s Claims and Exxon’s Offshore Operations

Exxon is also set to experience a major production boost from offshore wells in Guyana, an area believed to hold billions of barrels of oil. However, Venezuelan President Nicolás Maduro has recently made increasingly assertive claims regarding ownership of some of the acreage off Guyana and has even conducted military exercises nearby. Although Exxon has stated that Maduro’s claims do not impact its plans, further clarification may be sought by investors on the extent of this potential threat.

Pressure on Exxon’s Dividend and Competitor Comparison

Additionally, following Shell’s recent announcement regarding an increase in its payout, there may be mounting pressure on Exxon to raise its dividend as well. It is worth noting that Exxon’s stock currently yields 3.7%.

The results for Exxon’s fourth-quarter earnings are scheduled to be released before market open on Friday, with a conference call for investors set for 7:30 a.m. CT.

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