Chevron and Exxon Earnings on Tap: Downstream Takes the Spotlight

Oil and gas supermajors Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) reported fourth-quarter and full-year 2012 results on Friday before the markets opened. Both companies beat bottom-line expectations but missed on the top-line, as production generally fell but downstream operations kicked into gear to provide an earnings boost.

Chevron reported fourth-quarter earnings of $7.2 billion, or $3.70 per diluted share, a 43.4 percent gain on the year-ago period and ahead of expectations for $3.04 per share. Sales and operating revenue for the quarter fell 3.4 percent to $56 billion, mainly due to lower crude oil volumes. For the quarter, earnings from upstream operations increased 19.5 percent to $6.8 billion. Downstream operations moved from a loss of $61 million in the fourth quarter of 2011 to gains of $925 million in the fourth quarter of 2012.

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4Q 2012 4Q 2011 Full-year 2012 Full-year 2011
Diluted EPS ($) 3.70 2.58 13.32 13.44
Upstream Earnings ($) in millions 6,858 5,737 23,788 24,786
Downstream Earnings ($) in millions 925 (61) 4,229 3,591

“We’ve now led the industry in earnings per barrel for over three years,” commented John Watson, chairman and CEO. “In the downstream business, we completed a multiyear plan to streamline the asset portfolio,” he added.

Shares were up modestly, about half a percent, on Friday morning following the report. Meanwhile, Exxon Mobil edged lower…

Exxon Mobil reported earnings of $2.20 per diluted share, a 12 percent increase over the year-ago period, and ahead of expectations for about $2.00. The big news out of the report is that oil-equivalent production fell 5.2 percent year over year, catalyzing a 12 percent drop in fourth-quarter upstream earnings.

However, with record capital expenditures of $12.4 billion, a 24 percent year-on-year increase, Exxon is proactively pursuing exploration and production opportunities in both oil and natural gas, as well as enhancing its downstream operations.

4Q 2012 4Q 2011 Full-year 2012 Full-year 2011
Diluted EPS ($) 2.20 1.97 9.70 8.42
Upstream Earnings ($) in millions 7,762 8829 29,895 34,439
Downstream Earnings ($) in millions 1,768 425 13,190 4,459

At a glance, it’s easy to see that improvements in downstream earnings were the primary driving force for earnings in the fourth quarter.

BP (NYSE:BP) will report earnings on February 5. Earnings from BP’s downstream operations were off just 3.7 percent in the first nine months of 2012 compared to the period in 2011. Analysts are looking for earnings of $1.11 per share, a 53.9 percent decrease from the year-ago period, largely as a result of the company’s ongoing resolution of the Deepwater Horizon disaster.

As of 30 September 2012, “BP had paid a total of over $8.8 billion for individual, business and government entity claims, advances and other payments, including payments made by BP prior to the establishment of the Deepwater Horizon Oil Spill Trust,” the company reported in its third-quarter results.

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