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

HOUSTON, Jan 31 (Reuters) – ExxonMobil Corp (XOM.N) The company said Tuesday that it has posted a net profit of $56 billion for 2022, taking home about $6.3 million an hour last year, setting not just a company record but a historic high in the Western oil industry.

Oil majors are expected to beat their own annual records on higher prices and rising demand. The amount has renewed criticism of the oil industry and prompted calls by several countries to impose windfall profit taxes on companies.

Exxon’s results were higher than the $45.2 billion net profit it posted in 2008, when oil hit $142 a barrel, 30% higher than last year’s average price. Deep cost cuts during the pandemic helped boost revenue last year.

“Overall earnings and cash flow are up significantly year over year,” Exxon Chief Financial Officer Kathryn Michaels told Reuters. “So it really came from a combination of strong markets, strong performance, strong production and good cost control.”

Exxon said its fourth-quarter earnings took a $1.3 billion hit from a European Union windfall tax and asset impairments that kicked in in the final quarter. The company has sued the European Union, arguing that the levy violates its legal authority.

Excluding charges, full-year profit was $59.1 billion. Oil and gas production rose by about 100,000 barrels a day to 3.8 million bpd from a year ago. Adjusted profit was $3.40 per share, according to Refinitiv data.

Shares rose about 1% to $114.70.

“It’s a headline beat,” Braj Borgataria from RBC Capital said in a note, citing lower chemical margins, lower-than-expected bottom-line gains and more maintenance work planned at refineries this quarter.

Windall taxes

The results could set up another showdown with the White House. President Joe Biden’s administration blasted oil companies on Friday for pouring money into shareholder payouts rather than production. Exxon distributed $30 billion in cash to shareholders last year, more than its Western rivals.

Michaels countered that windfall profits taxes were “illegal and bad policy.” Imposing new taxes on oil revenue “has the opposite effect of what you’re trying to achieve,” which is to discourage new oil and gas production, he said.

Exxon expects cash flow from its operations to rise to $76.8 billion last year, rising to $48.1 billion in 2021. It also decided to hold $30 billion in cash reserves. The company said it had learned from the pandemic, finding it empty and raising debt to pay dividends to shareholders.

“Having a really strong balance sheet is a competitive advantage for us,” Michaels said, which allows the company to wait for potential acquisition opportunities and maintain its dividend plan even if energy prices eventually fall.

Exxon reported fourth-quarter net profit of $12.8 billion excluding charges, up 44% from the same period last year, but down 35% from the previous quarter.

Project cost

Exxon’s spending on new oil and gas projects rose to $22.7 billion last year, up 37% from the year before. The company increased spending on discoveries in Guyana, the US shale industry, and fuel refining and chemicals.

“The counter-cyclical investments we made before and after the pandemic delivered 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. Inflation has been in the double digits amid “really, really hot” demand for equipment and services, partly explained by rising costs in the Permian, he said.

Exxon guided Permian production to 600,000 bpd this year, 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 expected strong earnings from Shell Plc on Thursday and BP Plc and Total Energies 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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