XOM’s upstream segment
The largest segment of ExxonMobil’s (XOM) by earnings is its upstream segment. The relatively good news for XOM in 2Q13 was that upstream earnings were largely in line with expectations.
During 2Q13, XOM produced 4,074 thousand barrels of oil equivalents per day, largely in line with most analysts’ expectations. Upstream earnings were $6.3 billion in 2Q13, down $732 million from 1Q13. The largest driver of the delta was lower realizations (lower oil and gas prices). XOM stated that realizations caused $360 million of the earnings reduction. Plus, volume and mix effects (think lower production overall and greater relative production of lower-earnings products) lowered earnings by ~$300 million.
XOM noted that year-to-date performance in its upstream segment was in line with the projections the company gave at its analyst meeting in March of 2013. XOM had given full-year production guidance of 4.2 mmboe (million barrels of oil equivalent) per day for 2013, with 5% lower natural gas production and 2% higher liquids production year-over-year. Exxon also affirmed its capex guidance for the year. The affirmation of production and capex guidance was neutral. As some background, the market generally views lowering production guidance as negative, as it may reflect the underperformance of oil and gas assets. Increase of capex without an increase of production is also viewed as negative in general, as it may signal that a company needs to spend more in order to achieve the same amount of production.
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