ExxonMobil cites US tax reform as catalyst for US$50-billion investment plan
ExxonMobil’s US upstream earnings recorded a loss of US$429 million for full-year 2017, excluding US tax reform and impairments. With US$7.6 billion of tax reform benefits and US$521 million in asset impairments, the super-major reported US$6.6 billion in US upstream earnings in 2017.
US federal tax reform in the fourth quarter resulted in a noncash earnings gain of US$5.9 billion, spurring the super-major’s plan to invest US$50 billion in the US over the next five years – two-thirds in the upstream market and one-third in the downstream market – to increase production and enhance its integrated portfolio.
“The impact of tax reform on our earnings reflects the magnitude of our historic investment in the US and strengthens our commitment to further grow our business here,” ExxonMobil Chairman and Chief Executive Officer Darren Woods.
Earlier this week, the company announced plans to triple total daily production from its Permian basin operations by 2025 and invest US$2 billion in terminal and transportation expansions in the area
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Fourth-quarter earnings
US upstream earnings were US$7.1 billion in fourth-quarter 2017, including US$7.6 billion for tax reform and asset impairments of US$481 million.
US upstream earnings excluding US tax reform and impairments were a loss of US$60 million. Non-US upstream earnings were US$1.3 billion, including asset impairments of US$807 million and unfavourable impacts of US$480 million from US tax reform. Non-US upstream earnings excluding US tax reform and impairments were US$2.6 billion.
Global fourth-quarter upstream earnings were US$8.4 billion, up US$9 billion from fourth-quarter 2016, driven by US tax reform impacts. Fourth-quarter earnings excluding US tax reform and impairments increased US$1 billion, to US$2.5 billion, driven by higher prices as liquids realizations increased more than US$10/bbl.
Also adjusting for charges for US tax reform and impairments, ExxonMobil reported fourth-quarter 2017 net income of US$3.7 billion, a 2% decrease from fourth-quarter 2016 attributed primarily to the company’s international downstream segment. Full-year 2017 earnings were US$19.7 billion compared with US$7.8 billion in 2016.
Downstream earnings in the fourth quarter were US$1.6 billion, including US$618 million from US tax reform. Earnings excluding US tax reform and impairments declined US$289 million, to US$952 million, as the absence of last year’s Canada retail divestment gain of US$522 million was partially offset by higher margins and asset management gains in the current quarter.
Chemical earnings were US$1.3 billion in the fourth quarter. Excluding the US$335 million impact from US tax reform, chemical earnings increased US$63 million, or 7%, due to higher sales. Prime product sales of 6.8 million tonnes were the highest in a decade.
Production was down 130,000 boe/d, or 3%, in fourth-quarter 2017 compared with fourth-quarter 2016. Liquids production totalled 2.3 million b/d, down 133,000 b/d as field decline and lower entitlements were partly offset by higher volumes from work programmes and projects. Natural gas production was 10.4 bcfd, up 17 MMcfd from 2016, as project ramp-up and work programs were partly offset by field decline and lower demand.
Full-year earnings
ExxonMobil’s full-year 2017 earnings of US$19.7 billion were up 151% year-over-year.
Earnings excluding US tax reform and impairments were US$15.3 billion, up 52% from US$10.1 billion in 2016. Hurricane Harvey reduced earnings by an estimated US$250 million.
Cash flow from operations and asset sales was US$33.2 billion, including proceeds associated with asset sales of US$3.1 billion. Capital and exploration expenditures were US$23.1 billion, up 20% from 2016. Production was four million boe/d, down 2% from the prior year. Excluding entitlement effects and divestments, production was flat with the prior year.
Full-year 2017 upstream earnings were US$13.4 billion, up US$13.2 billion from 2016.
Higher realisations increased earnings by $5.3 billion. Unfavourable volume and mix effects decreased earnings by US$440 million. All other items increased earnings by US$8.3 billion, primarily due to the US$7.1 billion noncash impact from US tax reform, lower asset impairments of US$659 million, lower expenses, and gains from asset management activity.
Production of 4 million boe/d for full-year 2017 was down 2% compared with 2016.
Liquids production of 2.3 million b/d decreased 82,000 b/d as field decline and lower entitlements were partly offset by increased project volumes and work programmes.
Natural gas production of 10.2 bcfd increased 84 MMcfd from 2016 as project ramp-up, primarily in Australia, was partly offset by field decline and regulatory restrictions in the Netherlands.
US upstream earnings were US$6.6 billion in 2017, including US$7.6 billion of tax reform benefits and asset impairments of US$521 million.
US upstream earnings excluding US tax reform and impairments were a loss of US$459 million.
Non-US upstream earnings were US$6.7 billion, including asset impairments of US$983 million and unfavourable impacts of US$480 million from US tax reform. Non-US upstream earnings excluding US tax reform and impairments were $8.2 billion.
Downstream earnings of $5.6 billion in 2017 increased US$1.4 billion from 2016.
Stronger refining and marketing margins increased earnings by US$1.5 billion, while volume and mix effects decreased earnings by US$30 million.
All other items decreased earnings by US$40 million, driven by the absence of a US$904 million gain from the Canadian retail assets sale, and Hurricane Harvey related expenses, which were mostly offset by US$618 million of US tax reform impacts and non-US asset management gains in the current year.
During 2017, ExxonMobil purchased six million shares of its common stock at a gross cost of US$496 million to offset dilution related to the company’s benefit plans and programmes.
ExxonMobil said it will continue to do so, but that there are currently no plans to make purchases to reduce shares outstanding. The company issued a combined 96 million shares of common stock during the first-quarter to complete the acquisition of InterOil Corporation.