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Analyzing ExxonMobil’s Production and Realized Price Trends

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What investors can expect in 2Q15

We will discuss ExxonMobil’s (XOM) production and realized price trends in this article. From April 1–June 30, the West Texas Intermediate (or WTI) crude oil price increased 5.3%. During the same period, Henry Hub natural gas prices increased 6.3%. These can ease some of the pressure on ExxonMobil (XOM)’s average realized prices and subdue its upstream revenue decline in 2Q15, particularly in its US operations.

In comparison, from January 1–March 31, WTI crude oil fell ~10%. During the same period, Henry Hub natural gas prices decreased 12%. ExxonMobil (XOM) witnessed a significant decline in upstream revenues in 1Q15, particularly in its US operations.

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ExxonMobil’s average realized prices

In the US, ExxonMobil’s average realized prices for liquids and natural gas fell sharply in 1Q15 in the upstream segment, compared to a year ago. The prices for these products also declined compared with 4Q14. In its non-US operations, the natural gas price decline was less severe than in the US.

Crude oil and natural gas prices are the primary determinants of any energy upstream company’s business. In its upstream operations, ExxonMobil explores, produces, and markets crude oil and natural gas. So, the fall in crude oil and natural gas prices results in falling revenues.

Falling energy prices can also disincentivize producers like ExxonMobil (XOM), Linn Energy (LINE), Hess Corporation (HES), and Encana Corporation (ECA) on exploration activity–related expenditure, as well as capital expenditure falls. Exxon plans to cut capex by 11% to $34 billion in 2015 over 2014. XOM comprises 23% of the Vanguard Energy ETF (VDE).

ExxonMobil’s production trend

In both its US and non-US operations, ExxonMobil’s (XOM) 1Q15 total liquids (crude oil, natural gas liquids or NGLs, bitumen, and synthetic oil) production increased marginally since a year ago. Its natural gas production has been trending downward. In its downstream operations, petroleum product sales were steady in 1Q15. Chemical product sales decreased in the US, while remaining steady in its non-US operations.

Next, we will discuss ExxonMobil’s earnings growth in its various segments.

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