exxon mobil (XOM 1.48%) Last year was a record year. His $59.1 billion adjusted revenue for the oil giant is up $36.1 billion from the year before. It set a record for Exxon. It was also the highest tally in the history of the Western oil industry.
Despite its impressive feat, Exxon’s fourth quarter results were somewhat disappointing as lower oil and gas prices pushed earnings below analyst expectations.The company did not follow its rivals chevronof (CVX -0.45%) lead Announces significant boost to share buyback programThese disappointments may have some investors wondering if now is the time to bail out. energy stock.
Digging into Exxon’s record results
Exxon’s long-term investment strategy paid off big last year. Unlike many others in the oil industry, Exxon continued to invest in its business during his 2020 pandemic recession.[ing] As CEO Darren Woods said in an earnings report, this will allow the oil giant to capitalize on the recovery of the past few years. Guyana The US Permian Basin will grow by more than 30% in 2022.On the other hand, Exxon’s smelting Business achieved record performance in North America and global business reached its highest level since 2012.
These strong results enabled Exxon to generate an impressive $76.8 billion in cash flow from operations last year and an impressive $62.1 billion in free cash flow. This provided the company with funding to continue investing in its traditional and new energy businesses, strengthen its balance sheet and return cash to shareholders. Exxon paid out his $14.9 billion dividend and bought back the same amount of shares. The company has also expanded and extended its share buyback program up to $35 billion over the 2023-2024 period. That’s quite a number. However, it pales in comparison to his $75 billion program Chevron recently announced.
Exxon posted a strong performance in 2022, but several items of its fourth quarter results were not well received by investors. Given Chevron’s big boost, it was a shame there wasn’t a bigger buyback. Earnings, meanwhile, rose from nearly $85 billion to more than $95 billion, but fell short of analyst consensus expectations by $2 billion. Exxon also reported some unfavorable items in the fourth quarter. This includes his $1.3 billion hit related to windfall taxes and asset impairment charges on European operations. Finally, his $12.8 billion in total quarterly earnings fell well short of his $19.7 billion in the third quarter. This is partly due to these unfavorable items and lower oil and gas prices.but it was double Chevron fourth quarter earnings.
Cause of concern or bumps in the road?
It’s easy to ignore Exxon’s results, but the oil giant generated a huge amount of cash flow last year and is in a very strong position for the future.
Exxon strengthened its fortress-like balance sheet, built a cash position, and paid off its debt. These factors have reduced our net debt-to-equity ratio to very low levels for an oil company.
This gives us the flexibility to continue to invest in our business and return cash to our shareholders, even if market conditions deteriorate. Exxon plans to invest between $20 billion and $25 billion a year in traditional and new energy businesses by 2027. On the other hand, we have set a share buyback target until next year and continue to pay a large dividend.
Exxon is in a strong position to weather the fall in oil prices, but that’s not its outlook for the future. he said:
As the economy continues to recover, it will take time for current investments to bring in additional capacity. We’ll be in this pretty tight window with tight supply and demand. We can see the price going up again.
This outlook bodes well for Exxon’s future. Oil giants should continue to generate strong revenues and cash flows from their traditional energy businesses over the next few years. That way, we can invest more money and return it to our shareholders.
This oil stock has plenty of fuel left in the tank
Although Exxon’s fourth quarter results were somewhat lackluster, the oil giant posted the highest profit ever reported by a Western oil company last year. Given the CEO’s view of oil prices, we could all but repeat that performance in 2023. This should give the company more money to invest in its business and return to shareholders, which should boost its share price in the years to come. As a result, last quarter’s slight setback does not change theory.
Matthew Dilaro does not have any positions in any of the stocks mentioned. The Motley Fool has no positions in any of the companies mentioned. The Motley Fool’s U.S. headquarters has a disclosure policy.