Exxon Mobil Corporation (NYSE: XOM)

Exxon Mobil reported first-quarter 2025 earnings of $7.7 billion, or $1.76 per share, compared to $8.2 billion, or $2.06 per share, in the first quarter of 2024. This represents a 6% decrease in total earnings and a 15% decrease in earnings per share year-over-year. The decline was primarily attributed to a significant decrease in industry refining margins, weaker crude prices, lower base volumes from strategic divestments, and higher expenses from growth initiatives.

However, these headwinds were largely offset by several positive factors including advantaged volume growth in the Permian and Guyana, additional structural cost savings, and favorable timing effects. The company’s focus on operational excellence and strategic growth areas has helped maintain strong financial performance despite the challenging market environment.

Cash flow from operations remained robust at $13.0 billion, though down 12% from $14.7 billion in Q1 2024. Free cash flow for the quarter was $8.8 billion, also down 12% from $10.1 billion in the same period last year. The company continued to demonstrate strong capital discipline, with cash capital expenditures of $5.9 billion, in line with its full-year guidance range of $27-29 billion.

Shareholder returns remained a priority, with total distributions of $9.1 billion, including $4.3 billion in dividends and $4.8 billion in share repurchases. The company declared a second-quarter dividend of $0.99 per share, payable on June 10, 2025. These distributions are consistent with the company’s annual $20 billion share-repurchase program through 2026, reflecting its commitment to returning value to shareholders.

Exxon Mobil maintained an industry-leading balance sheet with a debt-to-capital ratio of 12% and a net-debt-to-capital ratio of 7%, reflecting debt repayment of $4.6 billion in the quarter. The period-end cash balance was $18.5 billion. This strong financial position provides the company with flexibility to pursue growth opportunities while continuing to deliver robust shareholder returns.

Upstream: First-quarter earnings were $6.8 billion, a $1.1 billion increase compared to the same quarter last year. This strong performance was driven by advantaged volume growth from the Permian and Guyana, as well as structural cost savings. Weaker crude realizations and higher depreciation were offset by other net favorable impacts primarily related to divestments. Net production increased by 20% to 4.6 million oil-equivalent barrels per day, largely due to Permian growth from the Pioneer acquisition, partially offset by non-core asset divestments.

Energy Products: Earnings for this segment were $827 million, down from $1.4 billion in Q1 2024. The decline was primarily due to significantly weaker industry refining margins, partially offset by favorable timing effects, structural cost savings, favorable foreign exchange effects, and the absence of unfavorable inventory impacts. Compared to the fourth quarter, earnings increased $425 million due to stronger North American industry refining margins driven by industry outages, favorable timing effects, and lower seasonal expenses.

Chemical Products: This segment reported earnings of $273 million, down from $785 million in the same quarter last year. Results were impacted by weaker industry margins, lower sales volumes, and higher expenses from turnaround activity and advantaged project start-up costs. However, first-quarter earnings improved $153 million versus the fourth quarter, with higher base volumes and lower expenses partly offsetting weaker margins from higher feed and energy costs.

Specialty Products: Earnings were $655 million, a decrease from $761 million in Q1 2024. The impact from additional structural cost savings was more than offset by higher expenses from new market developments and unfavorable foreign exchange impacts. Earnings decreased $91 million versus the fourth quarter due to higher basestock feed costs and the absence of favorable tax and year-end inventory impacts, partly offset by lower seasonal expenses.

Corporate and Financing: This segment reported net charges of $798 million, an increase of $436 million compared to the same quarter last year. The increase was attributed to lower interest income, unfavorable foreign exchange effects, and increased pension-related expenses. Net charges increased $642 million versus the fourth quarter, driven by unfavorable foreign exchange effects, higher corporate costs, and unfavorable tax impacts.

Exxon Mobil’s Upstream segment delivered strong performance in Q1 2025, with earnings of $6.8 billion representing a 19% increase year-over-year. The segment benefited from significant production growth, particularly in the Permian Basin following the Pioneer acquisition. Total production increased by 20% to 4.6 million oil-equivalent barrels per day, with liquids production rising 23% and natural gas production up 15%.

U.S. operations showed the most dramatic growth, with liquids production increasing by 74% to 1,418 kbd and natural gas production rising by 46% to 3,266 mcfd. This substantial growth was primarily attributed to the integration of Pioneer’s assets in the Permian Basin. The company’s strategic focus on high-return, advantaged assets continues to drive value in this segment.

Performance in other regions was mixed, with production in Canada/Other Americas remaining relatively stable. Operations in Africa saw a decline in production, primarily due to strategic divestments of non-core assets as part of the company’s portfolio optimization strategy. Meanwhile, production in Asia increased, with liquids up 12% and natural gas up 6% compared to the first quarter of 2024.

Looking ahead, the Upstream segment is positioned for continued strong performance, with the company highlighting its focus on advantaged projects and structural cost savings. Management noted that strategic choices made since 2019 to reduce costs, grow advantaged volumes, and optimize operations have strengthened quarterly earnings power by about $4 billion at current prices and margins.

Exxon Mobil’s downstream and chemical businesses faced challenging market conditions in Q1 2025, with earnings declining across all three segments compared to the same period last year. The Energy Products segment was particularly impacted by significantly weaker industry refining margins, though this was partially offset by favorable timing effects and structural cost savings. Despite these challenges, the segment showed sequential improvement with earnings increasing 106% from Q4 2024.

The Chemical Products segment faced the most significant year-over-year decline, with earnings dropping 65% to $273 million due to weaker industry margins, lower sales volumes, and higher expenses related to turnaround activity and project start-ups. However, an important milestone was achieved with the commencement of operations at the China Chemical Complex, which was completed ahead of schedule and under budget. When fully operational, this facility will have the capacity to produce 1.7 million tons per year of polyethylene and 850,000 tons per year of polypropylene, with more than 75% of capacity capable of producing high-value products.

Another significant development was the start of operations at the second advanced recycling unit in Baytown in April, which has the capacity to process 80 million pounds per year of plastic waste, doubling the company’s existing advanced recycling capacity. This development aligns with Exxon Mobil’s sustainability initiatives and positions the company to meet growing demand for circular solutions in the chemicals industry.

The Specialty Products segment continued to deliver strong earnings from its portfolio of high-value products, though results were down 14% year-over-year. The impact from additional structural cost savings was more than offset by higher expenses from new market developments and unfavorable foreign exchange impacts. This segment remains a stable contributor to the company’s overall earnings profile.

Exxon Mobil generated strong cash flow from operations of $13.0 billion in Q1 2025, though this represented a 12% decrease from $14.7 billion in the same period last year. Free cash flow totaled $8.8 billion, also down 12% year-over-year. Despite the decrease, these results demonstrate the company’s ability to generate substantial cash flow even in a challenging market environment.

The company maintained its commitment to returning value to shareholders, with total distributions of $9.1 billion in the first quarter. This included $4.3 billion in dividends and $4.8 billion in share repurchases, consistent with the company’s annual $20 billion share-repurchase program through 2026. The board declared a second-quarter dividend of $0.99 per share, payable on June 10, 2025.

Capital expenditures were $5.9 billion in Q1 2025, up 13% from $5.3 billion in Q1 2024, reflecting the company’s continued investment in high-return projects. The Upstream segment accounted for the majority of capital spending at $5.0 billion, with approximately 60% allocated to U.S. operations. These investments are focused on advantaged projects expected to deliver significant earnings growth in the coming years.

Exxon Mobil continued to strengthen its balance sheet by reducing debt by $4.6 billion in the quarter. This resulted in an industry-leading debt-to-capital ratio of 12% and a net-debt-to-capital ratio of 7%. The period-end cash balance was $18.5 billion, providing substantial financial flexibility to pursue growth opportunities while maintaining robust shareholder returns.

The company’s disciplined capital allocation strategy focuses on funding high-return projects, maintaining a strong balance sheet, and delivering industry-leading shareholder returns. Management reiterated that capital expenditures for the full year are expected to be in the range of $27-29 billion, consistent with previous guidance.

Exxon Mobil continues to make significant progress on its strategic initiatives and cost reduction efforts. The company achieved $12.7 billion of cumulative structural cost savings compared to 2019 levels, which includes an additional $0.6 billion of savings achieved during the first quarter of 2025. Management noted that these savings exceed all cost savings reported by other international oil companies combined, underscoring Exxon Mobil’s leadership in operational efficiency.

The company’s cost savings initiatives are focused on organizational simplification, operational efficiencies, and inventory optimization. These efforts have significantly strengthened the company’s earnings power, with management estimating that strategic choices made since 2019 have enhanced quarterly earnings potential by approximately $4 billion at current prices and margins.

In the chemicals business, a major milestone was achieved with the commencement of operations at the China Chemical Complex, which was completed ahead of schedule and under budget. This facility will significantly enhance the company’s chemicals footprint in Asia and is designed to produce high-value products that command premium pricing in the market. Additionally, the second advanced recycling unit in Baytown began operations in April, doubling the company’s capacity to process plastic waste and advancing its sustainability goals.

Looking ahead, Exxon Mobil is starting up 10 advantaged projects in 2025, which are expected to generate more than $3 billion of earnings in 2026 at constant prices and margins. These projects are part of the company’s strategy to focus investment on high-return opportunities that leverage its competitive advantages and core competencies.

Management remains confident in the company’s ability to execute its long-term strategy, emphasizing that the work done to transform the company over the past eight years positions it to excel in any environment. The combination of structural cost reductions, advantaged project developments, and portfolio optimization is expected to drive sustainable earnings growth through 2030 and beyond.

In the current uncertain market environment, Exxon Mobil is focusing on elements within its control to drive performance and deliver value to shareholders. Management highlighted that the strategic choices made since 2019 have positioned the company to excel regardless of market conditions, with Chairman and CEO Darren Woods stating: “In this uncertain market, our shareholders can be confident in knowing that we’re built for this.”

The company continues to execute its long-term strategy of reducing costs, growing advantaged volumes, and optimizing operations. These efforts have significantly strengthened quarterly earnings power by approximately $4 billion at current prices and margins compared to 2019 levels. Looking ahead, Exxon Mobil is starting up 10 advantaged projects in 2025 that are expected to generate more than $3 billion of earnings in 2026 at constant prices and margins.

Capital expenditures for the full year are expected to remain in the range of $27-29 billion, consistent with previous guidance. The company remains committed to its annual $20 billion share-repurchase program through 2026, reflecting confidence in its financial outlook and commitment to shareholder returns.

In the downstream and chemicals segments, the recently commenced China Chemical Complex and the second advanced recycling unit in Baytown represent significant growth opportunities. The China Chemical Complex, when fully operational, will enhance the company’s position in the high-growth Asian chemicals market, while the expanded recycling capacity aligns with increasing demand for sustainable solutions in the plastics industry.

Overall, while acknowledging the challenges in the current market, management expresses confidence in the company’s ability to deliver on its plans through 2030 and beyond. The combination of advantaged assets, structural cost savings, and disciplined capital allocation is expected to drive sustainable earnings growth and industry-leading returns to shareholders.