Exxon Mobil Corporation (XOM)

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Exxon Mobil Corporation (XOM)

Q3 2012 Earnings Call

November 01, 2012, 11:00 am ET

Executives

David Rosenthal - VP, Investor Relations & Secretary

Analysts

Doug Leggate - Bank of America

Evan Calio - Morgan Stanley

Robert Kessler - Tudor, Pickering, Holt

Doug Terreson - ISI

Allen Good - Morningstar Investment

Blake Fernandez - Howard Weil

Arjun Murti - Goldman Sachs

Faisel Khan - Citigroup

Pavel Molchanov - Raymond James

Edward Westlake - Credit Suisse

Paul Cheng - Barclays

Iain Reid - Jefferies

Presentation

Operator

Good day ladies and gentlemen and welcome to the Exxon Mobil Corporation Third Quarter 2012 Earnings Conference Call. Please note, today’s conference is being recorded. At this time, for opening remarks, I would like to turn the conference over to the Vice President of Investor Relations and Secretary, Mr. David Rosenthal. Please go ahead, sir.

David Rosenthal

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

Before we begin today, I would like to say a few words of support for those who have been impacted by Hurricane Sandy, which I know includes many people listening to today's call. Our thoughts are with you as you work to recover from the effects of the storm which has touched so many lives along the East Coast. We are doing everything we can in our operations to help support the recovery effort.

Now returning to Exxon Mobil’s results; but before we go further, I would like to draw your attention to our customary 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 uncertainty continued in the third quarter with further weakness in Europe and Japan. The European growth rate is estimated to remain negative in the third quarter following the contraction in the second quarter. Meanwhile, Japan is likely to decelerate further. The US economy marginally improved versus the second quarter and China’s growth rate decline moderated versus prior quarters.

Energy markets improved in the third quarter with higher crude oil and US natural gas prices and stronger industry refining margins versus the second quarter. Although, US commodity chemical margins remained strong, Europe and Asia margins showed continued weakness.

Turning now to the third quarter of financial results as shown on Slide 4; Exxon Mobil’s third quarter 2012 earnings were $9.6 billion, a decrease of $760 million from the third quarter of 2011. Earnings per share for the quarter were $2.09, down $0.04 from a year ago.

The corporation distributed $7.6 billion to shareholders in the third quarter through dividends and share purchases to reduce shares outstanding. Of that total, $5 billion was distributed to purchase shares. Share purchases to reduce shares outstanding are expected to be $5 billion in the fourth quarter of 2012.

CapEx in the third quarter was $9.2 billion, up 7% from the third quarter of 2011. Our cash generation remained strong with $14 billion in cash flow from operations and asset sales. At the end of the third quarter 2012, cash totaled $13.3 billion and debt was $12.4 billion.

The next slide provides additional detail on third quarter sources and uses of funds. Over the quarter, cash decreased from $18 billion to $13.3 billion. The combined impact of strong earnings, depreciation expense 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 of $8 million and shareholder distributions of $7.6 billion. Additional financing and investing activities decreased our cash by $3.1 billion, primarily due to the redemption of the SeaRiver deferred interest debentures.

Moving on to Slide 6 and a review of our segment results; Exxon Mobil’s third quarter 2012 earnings of $9.6 billion decreased $760 million or 7% from the third quarter of 2011, primarily due to lower gains from asset sales and lower upstream volumes, partly offset by higher refining margins.

Upstream earnings decreased $2.4 billion, while downstream earnings improved by $1.6 billion. Chemical earnings were down $213 million and corporate and financing expenses were favorable by $263 million, primarily due to tax items. Guidance for corporate and financing expenses remained at $500 million to $700 million per quarter.

As shown on Slide 7, Exxon Mobil’s third quarter 2012 earnings decreased by $6.3 billion compared with the second quarter of 2012, mainly due to lower gains on asset sales.

Moving next to third quarter business highlights and beginning on Slide 8; we continue to advance our global portfolio of high quality upstream projects. In Nigeria, the Satellites Phase 1 project continues to progress towards first oil in the fourth quarter of 2012. Drilling has commenced on two of the three platforms. The project will have a peak capacity of 70,000 gross barrels per day.

The Kearl Initial Development Project is now 98% complete and phased startup activities are underway. Mining operations have commenced and ore is being stockpiled adjacent to the ore processing plant. Commissioning of the ore processing plant and utility systems are progressing and the diluent and natural gas supply systems are operational.

Construction is also progressing at the Papua New Guinea LNG project which remains on schedule for a 2014 startup. In the third quarter, we completed both the hydro testing of the 250 mile offshore pipeline and structural steel construction on the LNG plant trains. Drilling commenced at Hides with the first of two rigs and the final site preparation is underway for the second drilling rig.

Read the rest of this transcript for free on seekingalpha.com