Exxon Earnings: Don't Expect Us to Restructure Like Our Competitors
It was a tough year for any company with a refining and marketing business. Even ExxonMobil, the largest U.S. oil company, saw its profits take a hit because of lagging demand, an oversupply of product and weak refining margins. And while many refiners and integrated oil companies shared the same struggles last year, Exxon made it clear in its fourth-quarter earnings call Monday, that it would not take the same road as its competition.
Of course, the super major was referring to ConocoPhillips and Chevron, the two largest U.S. oil companies behind Exxon. Last year Conoco announced it would sell $10 billion in assets over the next two years. Chevron announced recently it would restructure its refining and marketing operations, exit some markets and cut jobs. The announcement didn't come as a complete surprise for those following Chevron or the plight of the U.S. refinery industry. The month before the restructuring announcement, Chevron released its 2010 capital spendng plan, which scaled back spending in its downstream segment by $900 million.
David Rosenthal, Exxon's vice president of investor relations, noted the "tough environment" during the earnings call Monday. But stressed that Exxon was essentially going to stay the course.
"In terms of new strategies going forward, we are aware that some of our competitors have recently announced restructuring in their downstream business," Rosenthal said. "I think from our perspective though, we always have been very efficient in our operations and again are taking advantage of our strengths that we've had."Exxon doesn't need to restructure, in large part, because the super major already has slimmed down its downstream segment. Exxon has sold its interest in 10 refineries including Ingolstadt in 2007 and its Okinawa-based refinery in 2008 to Brazil's Petrobras, in a period "when the environment was literally the opposite of what we see today," Rosenthal said. Exxon has also sold about 5,000 miles of pipeline assets, 145 product terminals, several lube plants and 18,000 retail stations.
Exxon will instead focus on operational excellence and safety in thier refineries and taking advantage of its integration. Most of the company's large refining sites are fully integrated with its chemicals and lubes business, making it more competitive and able to realize additional profits compared to standalone refiners.
Here's some bits and pieces from Exxon's 4Q earnings report:
- Exxon earned $6.05 billion in the fourth quarter, a down 23 percent from $7.82 billion in same year-earlier period;
- Revenues in the fourth quarter were $89.8 billion, up 6 percent from $84.7 billion in the same year earlier period;
- Exxon's capital and exploration spending was $8.3 billion in the fourth quarter, up 21 percent from the same year-earlier period;
- Exxon's total earnings for 2009 were $19.4 billion, down 56 percent from $44 billion in 2008.