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How ExxonMobil’s Segmental Dynamics Shaped Up in Q3

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Dec. 4 2020, Updated 10:43 a.m. ET

Changes in ExxonMobil’s earnings mix

In the third quarter, ExxonMobil’s (XOM) earnings rose 57% YoY (year-over-year) to $6.2 billion. Though ExxonMobil’s overall earnings have risen, the company’s segmental dynamics have changed.

ExxonMobil’s Upstream segment, which contributed 39% to its overall earnings in the third quarter of 2017, added 68% in the third quarter. Its Upstream earnings constituted the majority of its total earnings, and its Downstream and Chemical segments’ contributions to its total earnings declined. ExxonMobil’s Downstream segment’s contribution fell from 39% in the third quarter of 2017 to 26% in the third quarter of 2018. The Chemical segment’s contribution fell from 28% to 11% in the same period. Other expenses dented the company’s earnings by 6% in the quarter.

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ExxonMobil’s integrated earnings model is in play

ExxonMobil’s earnings mix changed as discussed above mainly due to the higher oil price environment, which boosted the company’s Upstream earnings. However, in a comparatively low oil price environment, such as the one in the third quarter of 2017, Downstream and Chemical earnings support ExxonMobil’s overall earnings. In short, ExxonMobil’s earnings mix suggests that the company has successfully created an integrated earnings model capable of supporting its earnings at all price points in the oil cycle—a favorable situation for the company.

To add, in the third quarter, ExxonMobil used its midstream capabilities to utilize the price-advantaged Permian and Western Canadian crude in its refineries, expanding its margins. Thus, the integration of the company’s Upstream, Midstream, and Downstream assets led to a 7% YoY rise in its Downstream segment’s earnings in the third quarter.

Comparatively, peers Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP) saw their Downstream earnings fall YoY in the third quarter. Chevron’s adjusted Downstream earnings fell 8% YoY to $1.0 billion in the third quarter. Similarly, Shell’s Downstream earnings fell 25% over the third quarter of 2017 to $2.0 billion in the third quarter of 2018. BP’s downstream adjusted EBIT also fell 10% YoY to $2.1 billion in the quarter.

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