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Will Upstream Business Aid ExxonMobil's (XOM) Q2 Earnings?

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Exxon Mobil Corporation (XOM - Free Report) is geared up to release second-quarter 2021 results on Jul 30, before the opening bell. Since the integrated energy player has significant exposure to upstream business, the considerable improvement in oil price is likely to have aided the quarterly performance.

Upstream Business

ExxonMobil’s upstream businesses fall under core operations. This segment covers the company’s activities related to exploring, and developing of oil and natural gas resources. From upstream operations, within and outside the United Sates, the energy giant reported a profit of roughly $2.6 billion in the March quarter of this year.

Upstream Performance in Q1

Non-U.S. Operation: During first-quarter 2021, ExxonMobil reported earnings of $2.2 billion from upstream activities outside the United States. This marked an improvement from the year-earlier comparable quarter profit of $1.2 billion owing to higher prices and lower expenses.

U.S Operation: From domestic operations, ExxonMobil reported earnings of $363 million, representing a turnaround from a loss of $704 million in the year-ago quarter. Lower costs and higher prices aided domestic operations.

Q2 Oil Price

The price of West Texas Intermediate crude improved more than 20% in the June quarter of this year. In comparison with the year-ago quarter, the commodity price has improved drastically. The scale of the improvement can be represented as a price surge from the pandemic-hit low mark – when oil was in the negative territory – in April 2020, to breaking the psychological barrier of $70 per barrel.

The significant improvement in the commodity pricing scenario was backed by the optimism that fuel demand will recover considerably this year, thanks to the rolling out of coronavirus vaccines at a massive scale.

Forecast for Q2 Oil & Gas Production

The Zacks Consensus Estimate for second-quarter production is pegged at 3,658 thousand barrels of oil equivalent per day (MBoE/D), suggesting an increase from the year-ago quarter’s 3,638 MBoE/D.

Production of Crude & Natural Gas Liquids: The consensus estimate for world-wide net crude oil and liquids production is pegged at 2,305 thousand barrels per day (MBbl/D), indicating a marginal decline from 2,306 MBbl/D in the year-ago quarter.

Natural Gas Production: The Zacks Consensus Estimate for world-wide natural gas production available for sale is pegged at 8,055 million cubic feet per day (Mcf/d), implying a jump from 7,990 Mcf/d in second-quarter 2020.

Upstream Profit to Improve in Q2

Prices and production of commodities are the two key parameters that determine the fate of upstream operations. With oil equivalent production likely to have increased, the significant improvement in oil price is expected to have added to the positive. Thus, the Zacks Rank #3 (Hold) company’s earnings from upstream businesses are likely to have improved.

Non-U.S. Operation: The Zacks Consensus Estimate for earnings after taxes from non-U.S. upstream operations is pinned at $2,433 million, suggesting a turnaround from a loss of $454 million reported in the year-ago quarter.

U.S. Operation: The Zacks Consensus Estimate for after-tax loss from upstream operations in the domestic region is pegged at $533 million, indicating an improvement from a loss of $1,197 million in the year-ago quarter.

Earnings & Revenue Projections

The solid upstream business is likely to have aided the company’s earnings in the June quarter of 2021. The Zacks Consensus Estimate for second-quarter earnings of $1.02 per share suggests an improvement of 245.7% year over year. The Zacks Consensus Estimate for sales of $63.7 billion indicates a 95.5% year-over-year increase owing to higher production and commodity prices.

Exxon Mobil Corporation Price and EPS Surprise

Exxon Mobil Corporation Price and EPS Surprise

Exxon Mobil Corporation price-eps-surprise | Exxon Mobil Corporation Quote

Upcoming Releases of Other Energy Players

Other big energy giants, with significant upstream exposure, which are gearing up to release quarterly results are ConocoPhillips (COP - Free Report) , Chevron (CVX - Free Report) and EOG Resources Inc (EOG - Free Report) . ConocoPhillips, Chevron and EOG Resources are scheduled to report on Aug 3, Jul 30 and Aug 4, respectively. While ConocoPhillips and EOG Resources sport a Zacks Rank #1 (Strong Buy), Chevron carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.