Exxon Surpasses Expectations as Pioneer Deal Fuels Record Output

(Bloomberg) -- Exxon Mobil Corp. exceeded profit expectations after the $63 billion acquisition of Pioneer Natural Resources Co. pushed oil and natural gas output to a record.

Exxon earned $2.14 a share during the second quarter, 11 cents higher than the Bloomberg Consensus. The Pioneer takeover closed in early May, helping lift Exxon’s overall production by 15% on a sequential basis, and setting the stage for daily output to average more than 4 million barrels this year. 

Exxon’s results provide assurance to investors that the oil giant is well-placed to execute a 15% ramp-up in share buybacks to $20 billion a year even despite bearish crude-market signals. The company is the best-performing major oil stock this year.  

“It reflects how good we’re doing at capital allocation, spending on the right things that generate good returns,” Chief Financial Officer Kathy Mikells said during an interview. “At the same, we’re getting more efficient in the business. That’s a pretty powerful combination.”

Many oil explorers ramped up cash returns to shareholders as commodity prices soared in 2022 and 2023, and had plenty of cash left over to invest in low-carbon alternatives. But with many renewable bets fizzling, oil executives have been forced to refocus much of their attention on traditional fossil-fuel projects that can generate long-term cash flows. 

Exxon was an exception, having never turned its back on fossil fuels. It’s been able to increase production and returns, particularly through fast-growing projects in Guyana and the Permian Basin. 

Production in Guyana and the Permian Basin reached all-time highs during the second quarter. Exxon is now the biggest producer in the Permian after closing the Pioneer transaction, its biggest deal since the historic Mobil merger in 1999. 

“It gives us a really big boost,” Mikells said of the deal. 

Exxon plans to increase annual capital spending by 12% to $28 billion this year as a result of the combination with Pioneer. The boost is “consistent” with what Pioneer was previously spending, Mikells said. Cost savings through the integration process have come in ahead of expectations, she added. 

Oil refining, in which Exxon has a bigger footprint than peers, has been a weak performer this year amid lower-than-expected gasoline and diesel demand. Fuel-making margins were compressed by higher prices for heavy crudes, such as those from Canada. 

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