Oil prices rocketed during the first quarter due to the war with Iran. Brent oil, the global benchmark, surged from $60 a barrel at the beginning of the year to more than $100 a barrel by the end of March. While higher oil prices benefit oil producers like ExxonMobil (XOM 0.81%), the global energy giant's earnings slumped during the first quarter.
Here's a closer look at the oil stock's first-quarter results.
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Drilling down into Exxon's first quarter
ExxonMobil reported $4.9 billion, or $1.16 per share, of adjusted earnings during the first quarter. That was down from $7.3 billion in the fourth quarter and $7.7 billion in the year-ago period, even though oil prices and refining margins were higher this year. On a more positive note, Exxon's earnings did surpass analysts' expectations of $0.98 per share.
Two factors impacted its results: supply disruptions and timing. The company's operations in Qatar and the UAE delivered lower volumes due to the Strait of Hormuz closure and Iran's attacks on energy infrastructure in the Persian Gulf. The company also experienced operational disruptions in Kazakhstan and the U.S. due to winter storm Fern. Exxon partially offset those impacts with higher production in Guyana (which set a new quarterly record) and the Permian Basin. Overall, its global production averaged about 4.6 million barrels of oil equivalent per day (BOE/d), down from nearly 5 million BOE/d in the fourth quarter.
The other factor impacting Exxon's earnings was the estimated timing effects on its derivative positions. This timing issue, which will unwind in future periods upon the physical delivery of the underlying products, had an unfavorable impact of $3.9 billion. Without this timing issue and another identified item of $700 million due to supply disruptions in the Middle East, Exxon's earnings would have been $8.8 billion during the quarter.
NYSE: XOM
Key Data Points
A strong underlying quarter
While supply disruptions and timing muddied Exxon's quarter, the "underlying business delivered strong results," noted CEO Darren Woods in the first-quarter earnings press release. That's due to the company's transformational strategy, which it has been executing since 2018. This strategy has grown its advantaged volumes (lowest-cost, highest margin assets like Guyana and the Permian Basin), optimized its operations, reduced structural costs ($15.6 billion in cumulative savings since 2019), and strengthened its earnings power. Advantaged volume growth added $840 million to its bottom line in the first quarter, while its structural cost-savings strategy provided an incremental $430 million.
Exxon plans to continue executing this proven strategy in the coming years. It expects to deliver $25 billion in earnings growth and $35 billion in cash flow growth by 2030, at the same prices and margins as 2024's level. That puts it in a strong position to continue growing shareholder value through supply disruptions and across market cycles.
An all-weather oil stock to hold for the long haul
The war with Iran has had some negative impacts on Exxon's operations and financial results, which will likely continue in the second quarter. However, its underlying business continues to perform exceptionally well. It remains on track to deliver meaningful earnings and cash flow growth through 2030 and beyond as it navigates the oil industry's inevitable ups and downs. That makes it an ideal oil stock to hold for the long haul.
