Earnings increase in ExxonMobil’s downstream and chemical businesses
A key guide to ExxonMobil’s 3Q14 earnings (Part 5 of 11)
ExxonMobil’s downstream earnings improve
In 3Q14, ExxonMobil’s (XOM) earnings from its downstream U.S operations increased by 46% to $460 million, from $315 million recorded in 3Q13. Earnings from the non-U.S. operations more than doubled to $564 million in 3Q14, from $277 million in 3Q13.
Overall, downstream business produced 73% higher earnings in the third quarter of 2014 over the year-ago quarter. Downstream refers to crude oil refining and natural gas processing/purifying activities.
Falling crude price keeps cost down, as lower crude oil is used as input cost in ExxonMobil’s (XOM) downstream operations. ExxonMobil is a component of the Energy Select Sector of Standard and Poors depositary receipt (or SPDR) (XLE) and the SPDR MSCI World Quality Mix exchange-traded fund (or ETF) (QWLD). Other integrated energy companies that will benefit from falling crude oil prices include Royal Dutch Shell (RDS.A) and TOTAL SA (TOT).
Downstream earnings in 3Q14 were positively impacted by the following:
Stronger refiner margin, which added $820 million to earnings
Volume and mix effect, which added $100 million
Higher petroleum product sales
Downstream earnings were negatively affected by a $490 million decrease due to adverse foreign exchange movement impact.
Why ExxonMobil’s chemical business improved in 3Q14
In 3Q14, Exxon’s earnings from its chemical business in the United States increased 13% to ~$765 million, from $680 million recorded in 3Q13. Earnings from the non-U.S. operations improved at a relatively higher rate of 26% to $435 million in 3Q14, from $345 million in 3Q13. Overall, chemical business produced 17% higher earnings in the second quarter of 3014 over the year-ago quarter.
Chemical earnings in 3Q14 were positively impacted by higher volume and mix effect. Weaker margin in the specialty products negatively affected 3Q14 earnings, while higher margin in commodities improved the margin. Chemical product sales in 3Q14 did not change much relative to 3Q13.
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