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ExxonMobil’s Downstream Segment Saves the Day

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ExxonMobil’s 1H15 revenues

After analyzing ExxonMobil’s (XOM) 2Q15 segment-wise performance, we will now discuss its year-to-date (or YTD) revenues and earnings. XOM recorded $141.73 billion in revenues and other income for 1H15, down 35% from the $217.53 billion it recorded in 1H14. The biggest development was tumbling crude oil prices. The average North Sea Brent for 1H15 crude declined 48% compared to the average 1H14 levels. During 1H15, the US upstream E&P (exploration and production) operations also slowed down, which resulted in lower upstream revenues.

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ExxonMobil’s YTD net income

ExxonMobil’s YTD net income declined 49% to $9.13 billion compared to $17.88 billion net income a year ago. Net income margin (or net income as a percentage of its total revenues) declined to 6.4% in 1H15 from 8.2% in 1H14. The margin drop was less severe as a result of strong earnings growth in XOM’s downstream segment.

Year-over-year, ExxonMobil’s US earnings declined by 54% in 1H15 against a 43% fall in XOM’s revenues from its remaining international operations put together.

ExxonMobil’s YTD upstream versus downstream performance

ExxonMobil’s 1H15 crude oil price realization declined ~48% for operations in both the US and the rest of the world. The negative effect of lower price realization was partially offset by XOM’s upstream production, which increased 3% in 1H15 compared to 1H14. Volume growth was particularly visible in XOM’s crude oil production as a result of project ramp-ups and entitlement effects. Entitlement effects are changes to ExxonMobil’s production volumes share, which are caused by various non-operational factors. Overall, upstream earnings were down significantly by 69% during the same period.

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In comparison, ExxonMobil’s downstream segment improved remarkably. Earnings more than doubled to $3.17 billion during 1H15 over the same period in 1H14. Most of the improvements came through ExxonMobil’s superior international downstream operations. The company’s chemical segment earnings also increased 18% during the same period due to a better mix of higher margin products in XOM’s production portfolio.

In 1H15, ExxonMobil’s EBITDA (earnings before interest, tax, depreciation, and amortization) was $2.45 billion. In comparison, Total’s (TOT) EBITDA was $15.2 billion. Statoil’s (STO) EBITDA was $75.1 billion during the same period. Cenovus Energy’s (CVE) 1H15 EBITDA was $1.1 billion. ExxonMobil makes up 22% of the iShares US Energy ETF (IYE) and 15.7% of the Energy Select Sector SPDR ETF (XLE).

Next, we will discuss Wall Street analysts’ recommendations for ExxonMobil.

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