Exxon Mobil Corp. will increase spending on new oil wells and other projects by up to 45% after posting the biggest profit in nearly eight years amid soaring energy prices.
Net income adjusted for one-time items was $2.05 a share, according to a statement on Tuesday, 12 cents above the average analyst estimate compiled by Bloomberg. Capital spending for the full year will drop from $16.6 billion in 2021 to $21 billion to $24 billion. The shares rose 1.9% in premarket trading.
The results come a day after Exxon disclosed another belt-tightening decision, this time involving closing its headquarters in Irving and consolidating those offices near Houston. Exxon shares are up more than 20% this year, capping a nearly 50% advance in 2021 for the best annual performance in at least four decades.
Natural gas sales provided the main improvement in fourth quarter results as Exxon and other suppliers reaped strong returns amid fuel shortages in Europe and parts of Asia. Escalating oil prices have also proved a boon for the Western world’s largest crude oil explorer.
Chief Executive Darren Woods’ decision to reverse course on a pre-pandemic growth plan and keep capital spending at historically low levels means high commodity prices are directly translating into massive cash flow .
While some observers have expressed concerns about Exxon’s long-term commitment to fossil fuels, in the short term the company is profitably mining older reserves and replacing them with high-margin barrels from new discoveries in places like Guyana.
In 2021, Exxon has raised enough cash to repair its balance sheet, pay the third-largest dividend in the S&P 500 index and commit to restarting share buybacks. It is a remarkable financial turnaround for the oil giant a year after suffering its first annual loss in at least 40 years during the darkest days of the pandemic.
Exxon is under pressure to do more on climate change, especially after the success of activist investor Engine No. 1 last year. Its recently announced ambition to eliminate emissions from its operations by 2050 is a step in that direction, but the company will also need to allocate more cash to its low-carbon business over time, especially in areas such as carbon capture and biofuels.
Kevin Crowley, Bloomberg