Exxon Mobil Corporation (XOM) recently released its fourth-quarter 2023 earnings report, which showed earnings of $7.6 billion, or $1.91 per share assuming dilution. This figure includes identified items of $2.3 billion that had an unfavorable impact on earnings, primarily due to regulatory obstacles in California that prevented the production and distribution of assets in the region from coming back online. However, these impairments were partially offset by favorable tax and divestment-related items. When excluding these identified items, earnings were $10.0 billion, o $2.48 per share assuming dilution.
For the full year 2023, Exxon Mobil reported earnings of $36.0 billion, or $8.89 per share assuming dilution. The company achieved cumulative structural cost savings of $9.7 billion in 2023 surpassing its initial target of $9 billion. This cost exceeded savings expectations and resulted from additional savings of $2.3 billion during the year and $0.7 billion in the fourth quarter. Exxon Mobil plans to deliver cumulative savings of $15 billion by the end of 2027.
Breaking down the earnings by segment, upstream earnings for the fourth quarter were $4.1 billion, a decrease of $2.0 billion from the previous quarter. Identified items, mainly the impairment of idled assets in California due to regulatory challenges, negatively impacted earnings by $2.1 billion. However, excluding these identified items, earnings increased by $127 million to reach $6.3 billion. This growth was primarily driven by higher volumes and improved mix from Guyana and Permian growth, as well as stronger gas realizations, which offset lower crude realizations, unfavorable tax impacts, and year-end inventory effects.
Net production in the fourth quarter was 3.8 million oil-equivalent barrels per day, representing a quarter- on-quarter increase of 136,000 barrels per day. Energy Products earnings for the fourth quarter totaled $3.2 billion, an increase of $765 million compared to the previous quarter. This increase was driven by a favorable derivatives mark-to-market impact of $1.2 billion and the reversal of prior quarter unfavorable timing effects, which more than offset weaker seasonal industry refining margins. Results were also positively influenced by favorable tax and year-end inventory impacts as well as foreign exchange effects. However, these factors were partly offset by higher seasonal expenses and lower volumes due to scheduled maintenance and divestments. Excluding identified items, earnings for the quarter were $3.0 billion, reflecting an increase of $543 million from the previous quarter.
Looking ahead to the first quarter of 2024, Exxon Mobil expects lower volumes driven by the absence of favorable fourth-quarter entitlement impacts. However, the company anticipates a ramp-up in upstream volumes due to the Payara development. Exxon Mobil's CEO also forecasts the closing of the pioneer deal in the second quarter of 2024.
In terms of cash flow, Exxon Mobil generated strong cash flow from operations, totaling $13.7 billion, and free cash flow of $8.0 billion in the fourth quarter.
For the full year, the company saw an increase in cash of $1.9 billion, with free cash flow reaching $36.1 billion. The company also distributed $32.4 billion to shareholders in 2023, including $14.9 billion in dividends and $17.4 billion in share repurchases, in line with its previously announced plans.
Exxon Mobil declared a first-quarter dividend of $0.95 per share, payable on March 11, 2024, to shareholders of record as of February 14, 2024
The company has a debt-to-capital ratio of 16% and a net-debt-to-capital ratio of 5%, indicating a healthy financial position with a cash balance of $31.6 billion at the end of the period.
Looking ahead to the first quarter of 2024, Exxon Mobil expects lower volumes driven by the absence of favorable fourth-quarter entitlement impacts. However, the company anticipates a ramp-up in upstream volumes due to the Payara development. Exxon Mobil's CEO also forecasts the closing of the pioneer deal in the second quarter of 2024.
Shares of XOM are sliding in to test the $100-psyche which is an area that also houses the 20-day and 50-day moving average. This level will set up as key support. It will be interesting to see how the market digests the incredibly strong January jobs number. The economic strength should lead to an upbeat outlook in cyclicals but we have yet to see much interest from investors as most remain underweight in energy.
Overall, Exxon Mobil's fourth-quarter earnings report demonstrates a mixed performance. While identified items had an unfavorable impact on earnings, the company exceeded its cost-saving targets and generated strong cash flow. The dividend increase and commitment to rewarding shareholders further highlight the company's financial stability. However, lower volumes and ongoing litigation against activist shareholders continue to be areas of concern. Investors will likely monitor future developments in the industry and regulatory landscape as Exxon Mobil navigates these challenges.Investors will likely monitor future developments in the industry and regulatory landscape as Exxon Mobil navigates these challenges.Investors will likely monitor future developments in the industry and regulatory landscape as Exxon Mobil navigates these challenges.