Exxon Mobil Management Discusses Q4 2012 Results - Earnings Call Transcript

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Exxon Mobil (XOM)

Q4 2012 Earnings Call

February 01, 2013 9:30 am ET

Executives

David S. Rosenthal - Vice President of Investor Relations and Secretary

Analysts

Evan Calio - Morgan Stanley, Research Division

Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division

Edward Westlake - Crédit Suisse AG, Research Division

Robert A. Kessler - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Jason Gammel - Macquarie Research

Douglas Terreson - ISI Group Inc., Research Division

Iain Reid - Jefferies & Company, Inc., Research Division

Paul Y. Cheng - Barclays Capital, Research Division

Presentation

Operator

Good day, and welcome to the ExxonMobil Corporation Fourth Quarter 2012 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks, I would like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. David Rosenthal. Please go ahead, sir.

David S. Rosenthal

Good morning, and welcome to ExxonMobil's fourth quarter earnings call and webcast. The focus of this call is ExxonMobil's financial and operating results for the fourth quarter and full year 2012. I will refer to the slides that are available through the Investors section of our website.

Before we go further, I would like to draw your attention to our cautionary statement shown on Slide 2.

Moving to Slide 3, we provide an overview of some of the external factors impacting our results. Global economic growth remained weak in the fourth quarter, driven by the U.S., Japan and Europe. Preliminary fourth quarter U.S. GDP showed a slight decline of 0.1%. The Japanese and European economies remain challenged, with Japan experiencing its second recession in 3 years, and Europe likely marginally positive. Meanwhile, China's growth rate showed some improvement, reflecting an upturn in industrial production and higher retail sales. Energy markets were mixed in the fourth quarter, with higher U.S. natural gas prices and relatively flat Brent crude oil prices, while WTI's prices declined. European and Asian chemical margins showed improvement. However, global industry refining margins deteriorated significantly versus the third quarter.

Turning now to the fourth quarter financial results as shown on Slide 4, ExxonMobil's fourth quarter 2012 earnings were just under $10 billion, an increase of $550 million from the fourth quarter of 2011. Earnings per share for the quarter were $2.20, up $0.23 from a year ago. The corporation distributed $7.6 billion to shareholders in the fourth quarter through dividends and share purchases to reduce shares outstanding. Of that total, $5 billion was used to repurchase shares. Share purchases to reduce shares outstanding are expected to be $5 billion in the first quarter of 2013. CapEx in the fourth quarter was $12.4 billion, up 24% from the fourth quarter of 2011, primarily due to the Denbury transaction. Our cash generation remains strong with $14 billion in cash flow from operations and asset sales. At the end of the fourth quarter 2012, cash totaled $9.9 billion and debt was $11.6 billion.

The next slide provides additional detail on fourth quarter sources and uses of funds. Over the quarter, cash decreased from $13.3 billion to $9.9 billion. The combined impact of strong earnings, depreciation expense, working capital and the benefit of our ongoing asset management program yielded $14 billion of cash flow from operations and asset sales. Uses included additions to plant, property and equipment, or PP&E, up $10.1 billion and shareholder distributions of $7.6 billion. Additional financing and investing activities increased our cash by $300 million.

Moving now to the full year results as shown on Slide 6, ExxonMobil's full year 2012 earnings were $44.9 billion, up $3.8 billion from 2011. Earnings per share for the year were $9.70, up $1.28 from 2011. The corporation distributed $30.1 billion to shareholders in 2012 through dividends and share purchases to reduce shares outstanding. Of that total, $20 billion was utilized to purchase shares. CapEx in 2012 was $39.8 billion, up $3 billion from 2011, primarily due to continued progress on our world-class project portfolio, including the Kearl oil sands project. Included in full year CapEx was about $3 billion of acquisitions. Our cash generation was very strong with $63.8 billion in cash flow from operations and asset sales, including $7.7 billion associated with the asset sales.

Moving now to the full year cash flow statement as shown on Slide 7. During the year, cash decreased from $13.1 billion to $9.9 billion. The combined impact of strong earnings, depreciation expense, working capital and the benefit of our ongoing asset management program yielded $63.8 billion of cash flow from operations and asset sales. Uses included additions to PP&E of $34.3 billion and shareholder distributions of $30.1 billion. Additional financing and investing activities decreased cash by $2.6 billion.

Moving on to Slide 8 and a review of our segmented results. ExxonMobil's fourth quarter 2012 earnings of just under $10 billion increased $550 million or 6% from the fourth quarter of 2011, primarily due to higher refining and chemical margins, partially offset by lower production volumes and lower gains on asset sales. Upstream earnings decreased $1.1 billion while Downstream earnings improved by $1.3 billion. Chemical earnings were up $415 million and corporate and financing expenses increased by $141 million, primarily due to tax items. Guidance for corporate and financing expenses remain at $500 million to $700 million per quarter.

As shown on Slide 9, ExxonMobil's fourth quarter 2012 earnings increased by $380 million compared with the third quarter of 2012, primarily due to higher production volumes and gains on asset sales, partially offset by lower refining margins.

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