Exxon smashes profits of Western oil companies by $56 billion in 2022

HOUSTON, Jan 31 (Reuters) – Exxon Mobil Corp (XOM.N) reported a net profit of $56 billion for 2022, the company said on Tuesday, taking in about $6.3 million an hour last year and setting not only a company record but also an all-time high for the Western oil industry.

Oil companies are expected to break their own annual records on high prices and rising demand, leading to nearly 200 billion dollars. The scale has renewed criticism of the oil industry and prompted calls for more countries to tax companies’ windfall profits.

Exxon’s results far exceeded the then-record $45.2 billion net profit reported in 2008, when oil hit $142 a barrel, 30 percent above last year’s average price. Deep spending cuts during the pandemic helped boost revenue from last year.

“Total earnings and cash flow have grown quite significantly year-over-year,” Exxon Chief Financial Officer Kathryn Mikels told Reuters. “So it really came from a combination of strong markets, strong performance, strong production and really good cost control.”

Exxon said it took a $1.3 billion hit to its fourth-quarter earnings from a European Union windfall tax that kicked in last quarter and from asset impairments. The company is judicial EU arguing that the levy exceeded its legal powers.

Excluding fees, full-year profit was $59.1 billion. Production rose by about 100,000 barrels of oil and gas a day a year ago to 3.8 million barrels a day. Adjusted earnings per share of $3.40 beat the consensus of $3.29 per share, according to data from Refinitiv.

Shares rose about 1 percent to $114.70.

“It’s a headline win,” RBC Capital’s Biraj Borkhataria said in a note, despite lower chemical margins, lower-than-expected downstream earnings and plans for more refinery maintenance this quarter.

TAXES ON WONDERFUL PROFITS

The results could spark another confrontation with the White House. President Joe Biden’s administration on Friday criticized oil firms for pouring money into shareholder payouts rather than production. Exxon distributed $30 billion in cash to shareholders last year, more than any of its Western rivals.

Windfall taxes are “illegal and bad policy,” Michaels countered. Imposing new taxes on oil profits “has the opposite effect of what you’re trying to achieve,” she said, adding that it would discourage new oil and gas production.

Exxon boasted that its cash flow from operations jumped to $76.8 billion last year, up from $48.1 billion in 2021. And it decided to keep $30 billion on the cash balance. The company said it had learned from the pandemic when it found itself empty-handed and raised debt to pay dividends to shareholders.

“Having a really strong balance sheet is a competitive advantage for us,” Mickels said, adding that it allows the company to wait out potential acquisition opportunities and keep its dividend program intact even if energy prices eventually fall.

Exxon reported $12.8 billion in net profit for the fourth quarter before charges, up 44% from the same period last year but down 35% from the previous quarter as oil prices fell and some operations suffered from disruptions related to the cold weather.

PROJECT COSTS

Exxon’s spending on new oil and gas projects rebounded last year to $22.7 billion, up 37 percent from a year earlier. The company has increased spending on discoveries in Guyana, the largest shale deposits in the US, as well as refining fuels and chemicals.

“The countercyclical investments we made before and during the pandemic provided the energy and products people needed as economies began to recover,” Exxon CEO Darren Woods said in a statement.

Investments could reach $25 billion this year, Woods said. Part of that is explained by rising costs in the Permian, with double-digit inflation, amid “really, really hot” demand for equipment and services, he said.

Exxon guided Permian output this year to 600,000 bpd, up 50,000 bpd from last year but slightly below market expectations. On the other hand, Woods predicts that strong refining margins will continue into 2023.

Exxon’s results came ahead of what is expected to be strong earnings from Shell plc on Thursday and from BP plc and TotalEnergies next week.

Reporting by Sabrina Valle in Houston; Additional reporting by Mrinalika Roy in Bengaluru; Editing by Christian Schmollinger and Mark Porter

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