ExxonMobil beats earnings estimates in Q4; outlook remains positive
- ExxonMobil’s adjusted earnings beats estimates in 4Q23; strong performance was driven by higher production and improved margins
- Cash flow from operations reached US$55.4bn in FY23, of which US$32.4bn returned to shareholders (almost 8% total shareholder return yield)
- Guyana and Permian production growth to continue, completion of Pioneer acquisition later this year will be keenly watched
- We reiterate a BUY rating on ExxonMobil with a target price of US$125
ExxonMobil reported strong 4Q23 earnings, beating analyst estimates. Adjusted earnings of US$10bn was up 9% q-o-q , driven by higher production volumes from Guyana and Permian assets, favourable derivative mark-to-market impacts, as well as improved chemical margins. For the full year 2023, ExxonMobil delivered robust adjusted earnings of US$38.6bn, down 35% from 2022 record levels. This was supported by production growth in Guyana and Permian assets, additional structural cost reductions of US$2.3bn in 2023, achieving US$9.7bn of cumulative cost savings since 2019 and exceeding targets. Cash flow from operations reached US$55.4bn in 2023. The company returned an impressive US$32.4bn to shareholders, comprising US$14.9bn in dividends and US$17.4bn in share repurchases, in line with announced plans.
Accelerates capex for growth. ExxonMobil invested US$26.3bn capex in 2023, slightly ahead of guidance, as it accelerated progress in Permian and Guyana assets and set up a new Lithium business. Capex guidance for 2024 stands at US$23-25bn. Looking ahead, 2024 growth will be driven by further production increases in Guyana and Permian. The company also sees strong long-term growth potential from the proposed merger with Pioneer Natural Resources, which is expected to close in Q2 2024. The merger could accelerate emissions reductions and recover resources more efficiently. We reiterate a BUY rating on ExxonMobil with a US$125 price target. The company’s leading shareholder returns, addition of premium upstream assets, and cost management efforts should continue driving earnings and cash flow growth.