Global Oil major, Exxon Mobil has indicated its Q1 2022 production results could rise above a seven-year quarterly record, with operating profits from drilling oil and gas of up to $9.3 billion.
Presenting a brief of the firm’s quarter-ended March 31, 2022, showed that operating profits from its oil and gas unit could catapult by $1.9 -$2.7 billion over the previous quarter’s $6.6 billion. That said, the company’s official results are expected to be released later, on April 29, 2022, according to a securities filing.
Although there are existing volatilities in the price of oil and gas, Exxon Mobil does not hedge its price, or lock in oil sales, as results generally match changes in energy prices. Russia’s invasion of Ukraine skyrocketed oil prices by 45 per cent over the last quarter of 2021, to an average of $114 per barrel, the highest in seven years.
Exxon’s record oil and gas profits present a preview of what lies ahead for other firms’ oil earnings. With such blockbuster profits, this could trigger 2021-styled calls by the US and European Union lawmakers for windfall profit taxes on oil and gas companies.
The oil major, however, stated in the securities filing that final results could be dampened due to impairments to Exxon’s Russian operations. The oil company has as much as $4 billion in assets at risk to potential seizure and faces a 1 per cent to 2 per cent hit to production and revenue from the move.
“Depending on terms of its exit from Sakhalin, the company may be required to impair its investment in the project,” it said in the filing.
Exxon’s Chemicals Business to be Affected
Furthermore, the move could result in raising the company’s operating profits in refining, up to $300 million higher, while its chemicals business could decrease by as much as $300 million compared to the previous quarter.
First quarter per share profit was projected to be $2.12, according to the mean estimate of 18 analysts tracked by Refinitiv IBES. This could also be likened to a year-on-year growth of more than 200 per cent from a year ago. According to Reuters, analysts could review their previous outlook following Exxon’s estimates.
High oil and gas prices accelerated after Russia’s invasion and sanctions were imposed on its oil, coal and LNG. Global oil prices hit a 14-year high in the first quarter and have since cooled as the US announced a release of emergency stocks and China began a lockdown.
Earlier last month, Exxon suspended its liquefied natural gas project in Russia’s Far East. Prior to the firm’s response to Russia’s invasion of Ukraine, Exxon’s plan for the year was to build the Far East Liquefied Natural gas (LNG) project with annual capacity of more than 6 million tonnes as part of the Sakharlin-1 consortium operated by Russian energy giant Rofsnet.
“The project, which the Americans- Exxon- had announced at the port of De Kastri with the pipe from Sakhalin, is frozen until further notice from them,” according to media report by Interfax, quoting Russia’s Khabarovsk region’s governor Mikhail Degtyaryov. He added that “Why has it been done? I am astonished, this is a shot in the foot.”
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