Exxon will crush the profits of major western oil companies by $ 56 billion in 2022

HOUSTON, Jan. 31 (Reuters) – Exxon Mobil Corporation (XOM.N) The company said on Tuesday that its net profit for 2022 amounted to $56 billion, and it made about $6.3 million per hour last year, setting not only a record for the company, but also a historic high for the western oil industry.

Major oil companies are expected to break their own annual records as prices and demand soar, pushing them collectively to nearly $200 billion. The measure renewed criticism of the oil industry and prompted calls for more countries to impose windfall profits taxes on corporations.

Exxon’s results far exceeded its record net profit of $45.2 billion it reported in 2008, when the price of oil reached $142 a barrel, 30% higher than the average price last year. Big cost cuts during the pandemic helped boost last year’s earnings.

Exxon Chief Financial Officer Kathryn Michaels told Reuters: “Gross earnings and cash flow rose significantly year-on-year.” “It really came from a combination of strong markets, strong productivity, strong production, and really good cost control.”

Exxon said it took $1.3 billion in profit in the fourth quarter from a windfall profit tax in the European Union that began in the fourth quarter and from weak assets. The company is suing the European Union, arguing that the tax is beyond its legal authority.

Excluding fees, full-year earnings were $59.1 billion. Production increased by about 100 thousand barrels of oil and gas per day from last year to 3.8 million barrels per day. According to Refinitiv data, adjusted earnings per share of $3.40 beats the consensus of $3.29 per share.

Shares rose about 1%, to $114.70.

“It’s a major hit,” Prag Purkhataria of RBC Capital said in a note, despite lower chemicals margins, lower-than-expected downstream earnings and plans for higher refinery maintenance this quarter.

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The results could lead to another confrontation with the White House. President Joe Biden’s administration on Friday criticized oil companies for pumping money into shareholder payments instead of production. Exxon distributed $30 billion in cash to shareholders last year, more than any of its Western competitors.

Michaels replied that windfall profits taxes are “an illegal and bad policy”. She said that imposing new taxes on oil revenues “has the opposite effect of what you are trying to achieve,” adding that it would discourage new oil and gas production.

Exxon boasted that cash flow from operations rose to $76.8 billion last year, compared to $48.1 billion in 2021. It decided to hold $30 billion as a cash balance. The company said it 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,” Michaels said, adding that it allows the company to wait out potential acquisition opportunities and maintain its dividend program even if energy prices eventually decline.

Exxon reported $12.8 billion in fourth-quarter net profit excluding fees, up 44% from the year-ago period but down 35% from the previous quarter as oil prices fell and some operations suffered outages related to cold weather.

Project spending

Exxon’s spending on new oil and gas projects rebounded last year to $22.7 billion, up 37% from a year earlier. The company has increased its spending on discoveries in Guyana, in the largest shale field in the United States, and on refining fuels and chemicals.

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

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

Exxon led Permian production this year to 600,000 bpd, up 50,000 bpd from last year but slightly below market expectations. On the other hand, Woods expects strong refining margins to continue in 2023.

Exxon’s results come ahead of what are expected to be strong earnings from Shell plc on Thursday and from BP plc and Total Energy next week.

(Reporting by Sabrina Valli in Houston); Additional reporting by Mrinalika Roy in Bengaluru. Editing by Christian Schmollinger and Mark Porter

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