The Zhitong Finance App learned that ExxonMobil (XOM.US)'s third-quarter profit exceeded market expectations, and record profits from the refining business became the main driver. At a time when the Middle East conflict and Ukraine's attack on Russia's fuel infrastructure are disrupting global energy supply, rising gasoline and diesel prices have significantly boosted refining profits, and also highlighted the company's previous investment advantage in refining capacity along the US Gulf Coast.
According to ExxonMobil's pre-market earnings report on October 30, total revenue and other revenue for the third quarter was US$113.164 billion, up 32.7% year on year; net profit attributable to shareholders was US$15.413 billion, up 104% year on year; reported earnings per share was US$3.72, up 111% year on year; and adjusted earnings per share were US$4.23. Adjusted earnings per share were above analysts' average expectations of $4.13.
The company's overall profit for the quarter reached the fourth highest level in its 156-year history, with the refining business performing particularly well. The Energy Products Division reported profit of US$7.169 billion, up 31% month-on-month; adjusted profit reached US$9.53 billion, up 121% month-on-month, and nearly quadrupled year-on-year, reaching a record high.
The sharp rise in refining profits was mainly due to higher gasoline and diesel prices and tightening global supply of refined oil products. ExxonMobil's indicative refining profit margin for the quarter rose to $50.3 per barrel, far higher than $29 in the second quarter; the utilization rate of crude oil units at US Gulf Coast refineries reached 100%. As the Middle East conflict disrupts the energy market and Ukraine attacks Russia's fuel infrastructure, the global refining and refined oil product supply chains are under pressure, and companies with sufficient refining capacity have gained more profit space as a result.
As the world's largest refining system operator outside of China, ExxonMobil has an advantageous position in this round of rising refining profits. Neil Hansen, the company's chief financial officer, said that profit growth was not so much a windfall as a return for the company to increase production when the market needed it most. Since 2019, ExxonMobil has increased US Gulf Coast distillate production by about 40%, thanks to continued investment in refining facilities in recent years, while some competitors chose to sell refining assets or convert them into biofuel plants during the same period.
Hansen pointed out that the most meaningful way for companies to cope with rising global commodity prices is to use existing capacity to increase supply as much as possible. At a time when supply is tight in the global refined oil market, ExxonMobil is supplying more diesel to the market.
ExxonMobil Chairman and CEO Darren Woods also said that the company continues to improve operational efficiency while increasing production through scale, integrated advantages and technical capabilities. Investments, including the expansion of the Beaumont refinery, drove the company's US Gulf Coast distillate production to increase by about 40% compared to 2019. Woods emphasized that since 2019, the company has achieved $16.9 billion in structural cost savings. These improvements are not only due to favorable commodity prices and profit margins, but are the result of continuous investment, technological progress, and operational execution.
However, the strong performance of the refining business did not occur simultaneously in all business segments. The profit of the upstream business in the third quarter was US$7.088 billion, down 11% month-on-month, mainly due to the decline in the average price of Brent crude oil from US$104.52 per barrel in the second quarter to US$97.01, and the acceleration of Guyanese equity. The profit of the chemical business was US$735 million, down 35% from the previous month; the price of polyethylene in North America fell from US$1,454 to US$998 per ton.
In terms of production, ExxonMobil's upstream production in the third quarter was 4.496 million barrels of oil equivalent per day, a decrease of 18,000 barrels over the previous month; the average production for the first nine months of this year was 4.534 million barrels of oil equivalent per day, down 2.5% year on year. The company attributed the change in production to the impact on production in the Middle East and the divestment of assets.
At a time when energy supply is tight, Mozambique's LNG project layout increases
In addition to the refining business benefiting from tight supply of refined oil products, ExxonMobil is also expanding its long-term natural gas asset layout.
In an interview, Hansen said that the company raised its interest in the Rovuma liquefied natural gas (LNG) project in Mozambique from 37.5% to 50% through an asset exchange with Italian energy company Eni (Eni), and continues to be the project operator. In exchange, Eni will receive other assets in the region.
The two sides plan to make a final investment decision on the project before the end of this year. Hansen said that the company is working with the Mozambican government to advance the development plan and related approval work, and the related process is progressing smoothly.
The Rovuma LNG project was stalled for more than four years due to local security threats. As the Iran war disrupted global LNG supply and gas prices in Europe and Asia rose to near historic highs, the strategic value of the project was further highlighted. Although sales contracts have been signed for most of the expected production of the project, ExxonMobil chose to increase its shareholding ratio, showing its confidence in the long-term prospects of the project. If the project finally progresses, it could also become the largest working capital project in ExxonMobil's history.
Solid cash flow, increasing dividends for 44 consecutive years
Strong earnings performance also further improved ExxonMobil's cash flow and balance sheet. In the third quarter, the company's operating cash flow reached US$25.65 billion, and free cash flow was US$19.11 billion; capital was distributed to shareholders of US$9.4 billion, including US$4.3 billion in dividends and US$5.1 billion in share repurchases.
The company announced that it will raise the fourth quarter dividend to $1.07 per share, achieving the 44th consecutive year of increasing the annual dividend; at the same time, it plans to maintain a 20 billion US dollar share repurchase scale in 2027. At the end of the third quarter, the company's net debt fell to US$22.1 billion, down about US$11 billion from the beginning of the year.
Judging from market performance, since the US and Israel launched an attack on Iran at the end of February, international oil prices have risen by nearly 60%. ExxonMobil's stock price has risen by about 20% during the same period, and hit an all-time high this week. As the Middle East conflict continues to disrupt energy supply, the market previously relied mainly on strategic and commercial inventories to fill the supply gap, but as inventory buffers are gradually being consumed, energy price fluctuations may further intensify.
At the same time, rising fuel prices are putting pressure on American consumers. High energy costs have become an important topic in discussions on the cost of living in the US, and may affect voter sentiment in some constituencies in the upcoming midterm elections. For energy giants such as ExxonMobil, the rise in refined oil prices has brought huge profits, but it has also brought a sharp contrast between corporate profit performance and the pressure on energy costs borne by consumers.