The fourth quarter was not kind to Exxon Mobil (NYSE:XOM). Shares of the oil and gas super major closed Wednesday’s regular session down 0.56 percent at $95.11 and fell as much as 1.5 percent further in early trading on Thursday after the company reported fourth-quarter and full-year results that generally missed analyst expectations.
Fourth-quarter earnings fell 16 percent on the year to $8.35 billion, and earnings per diluted share fell 13 percent to $1.91, below the mean analyst estimate of $1.91 per share by a penny. Full-year earnings fell 27 percent to $32.58 billion, and earnings per diluted share fell 24 percent to $7.37, below the mean analyst estimate of $7.40.
Earnings suffered at both upstream and downstream operations. Exxon Mobil reported fourth-quarter upstream earnings of $6.79 billion, down about 12.6 percent on the year. Full-year upstream earnings of $26.84 billion were down about 10.2 percent on the year. Fourth-quarter downstream earnings of $916 million were down about 48.2 percent on the year, while full-year downstream earnings of $3.45 billion were down 73.9 percent from 2012. Much of the loss in downstream earnings was “driven by the absence of the $5.3 billion gain associated with the Japan restructuring,” and “[l]ower margins, mainly refining, decreased earnings by $2.9 billion.”
If the earnings decline wasn’t enough to cast a pall over shareholders, then a 1.8 percent year-over-year decline in fourth-quarter oil equivalent production may do the trick. Production declines were led by declines in entitlement volumes, but even excluding this, impact production was flat. Natural gas production fell by 654 million cubic feet per day (mcfd) to 11,887 mcfd. Excluding impacts from entitlement volumes, natural gas production volume fell 3.9 percent, “as field decline was partially offset by project ramp-up and increased demand.”
In December, analysts at Goldman Sachs upgraded Exxon Mobil stock from Neutral to Buy, arguing that oil and gas super majors — a group of industry titans that includes Chevron (NYSE:CVX), Royal Dutch Shell (NYSE:RDSA)(NYSE:RDSB), BP (NYSE:BP), and Total SA (NYSE:TOT) — are headed for an inflection point in 2014. Production volume is expected to grow organically for the first time since 2006 at Exxon Mobil thanks to a “positive inflection in Exxon’s production profile.”
Although Exxon Mobil’s fourth-quarter numbers didn’t quite hit the mark, the outlook for the year is still generally optimistic. Chairman Rex Tillerson commented in the earnings release that “Disciplined use of capital, project execution and asset management are positioning the company to deliver sustained superior financial performance across the business cycle. Over the next two years, ExxonMobil will start up numerous major projects delivering profitable new supplies of oil and natural gas while strengthening our refining and chemicals businesses.”
Chevron, which will report its year-end earnings on January 31, is in a similar boat as Exxon Mobil. Analysts are expecting earnings to decline by 21.4 percent on the year to $2.57 as the super major works against headwinds and restructuring.