Exxon on U.S. Oil Refiners

Exxon Mobil Corp. (XOM) on U.S. refiners. From Exxon's Q408 conference call:

Q: On U.S. refining or just refining numbers in general. There is tremendous volatility. I’m bit surprised that you lost money in the U.S. downstream and made so much money in the international downstream. Can you -- especially given the performance of some of your peers throughout this week, can you help us out at all to understand kind of the refining dynamics that are going on and maybe a little bit of guidance for what we should expect going forward?

A: If we look at the fourth quarter '08 versus the fourth quarter '07, in total, the margin effect as I mentioned was a positive about $890 million. And this was driven by stronger non-U.S. margins with improvements both in non-U.S. refining and marketing margins. Overall, U.S. margins were actually down and that was driven by weaker refining margins across the quarter... If you look at the earnings particularly in the U.S... that change in earnings... was driven by significantly lower refining margins.

Q: So there is nothing from a quarter-on-quarter basis that in terms of just volatility in the numbers from rapid price movements, is there anything else that we should be aware of?

A: Well, yes, there are some effects included in there as you know. Changes in prices over time can have some price finalization impacts as well as impacts due to temporary changes in inventory across the year. But it is driven by overall again lower refining margins.

Q: Any potential exposure that you might have to the strike down in the Gulf Coast or that potential strike down on the Gulf Coast are you exposed?

A: We have a total of four refineries that have United Steel Workers and International Brotherhood of Electrical Workers Agreement. And in these four refineries, they expire at the end of the month. These refineries are Beaumont, Chalmette, Torrence and Billings... ExxonMobil is currently engaged in active negotiations with the union.

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Comments

[SA Editor E...:]

Great excerpt.

Feb 04 11:08 AM

[James Wilson:]

Refiners refusing oil shipments to keep the price of gasoline high creates a preceived gas shortage.

The Amercan Consumer can not help improve the economy with a foot on their throat.

Feb 04 02:37 PM

[legmaker:]

Although Exxon may have some trouble in the short term, long term looks excellent. They are performing well even in a difficult environment and even though the Street didnt love the stock this earnings period, some time soon they will. Very informative. Thank you and God Bless.

Feb 05 01:13 AM

[edh:]

He said absolutely nothing, except to say that lower US margins were caused by lower margins. Guy is better than Congress in not answering.

Feb 05 11:07 AM