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Martin Tillier

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The Key Takeaways This Earnings Season

Exxon Mobil and Chevron released fourth quarter earnings this morning, and the market cheered. After a period of misses, this morning’s release was the second consecutive beat of expectations for EPS by Exxon, confirming that Q3 wasn’t just a flash in the pan. Chevron also built on last quarter’s good results. That is welcome news for both companies, but if you dig a little deeper into the numbers and accompanying comments there are some interesting things that can be learned that go beyond the company-specific.

(Click to enlarge)

Obviously, EPS of $1.41 versus expectations for $1.08 at XOM were significant, but it came on revenue of $71.89 billion that was just below the consensus estimate for $72.4 billion. CVX missed expectations slightly on EPS, and also missed on revenue. That suggests that the main story here was one of increased profitability at Exxon, not an industry-wide improvement in market conditions. Investors should therefore avoid extrapolating long-term good news for other big oil companies and the energy sector in general. In fact, some of the details of the Exxon beat actually suggest that the opposite may be true.

They reported a four percent increase in oil production, an increase largely down to increased activity in the Permian Basin. About one third of U.S. crude now comes from that region and, based on other details given by Exxon’s CEO Darren Woods in a post-earnings interview on CNBC, the cost…



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