Published - February 1, 2023 @ 10:56 AM (EET)

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Bolstered by high commodity prices, rising energy demand, and a well-timed strategy to invest in its Permian Basin assets, Exxon (NYSE:XOM) reaped a record $56 billion profit that surpassed fourth-quarter estimates, keeping the stock's upward momentum going.

Taking home about $6.3 million per hour last year, full-year profit, excluding one-time items, jumped 157% from 2021, marking a historic high for the Western oil industry.

Following the results on Tuesday, the White House, in a statement, expressed outrage at the record profits, saying the profit margin was particularly shocking as Americans paid high prices and dismissed attempts by republicans to push policies aimed at supporting the oil industry.

"The latest earnings reports make clear that oil companies have everything they need, including record profits and thousands of unused but approved permits, to increase production, but they're instead choosing to plow those profits into padding the pockets of executives and shareholders while House Republicans manufacture excuse after excuse to shield them from any accountability," the White House said.

Shares of the oil and gas titan fell about 1% after earnings were announced.

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WHY IT MATTERS

As Russian forces stormed into Ukraine and demand surged as global economies rebounded last year, Exxon shares rose about 80%, the fourth-highest stock-price increase in the S&P 500 index.

According to Dow Jones Data, the only oil companies ahead of Exxon were Occidental Petroleum Corp. (NYSE:OXY), Hess Corp. (NYSE:HESS), and Marathon Petroleum Corp (NYSE:MPC).

Exxon generated a staggering $76.8 billion in cash for its operations, representing year-over-year growth of 142%. Earnings per share, boosted by stock buybacks, soared 146% to $13.26.

However, while the five so-called supermajors are swimming in cash following a record 2022, pressure is mounting on executive teams to satisfy competing demands.

The conflicting interests include investor appetite for bigger payouts and buybacks versus political outrage over windfall profits during warfare and economic dislocation.

Last year, Exxon expanded buybacks multiple times and pledged to repurchase $35 billion of stock through 2024. But Chief Financial Officer Kathy Mikells told analysts during the earnings call that the company is pursuing a more "balanced" approach to buybacks and dividends while reducing debt and investing in new projects.

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NOW WHAT

For the fourth quarter, Exxon said it incurred a $1.3 billion hit for a windfall tax that the European Union began in the final quarter and from asset impairments.

Spending on new oil and gas projects bounced back in 2022 to $22.7 billion, up 37% from the year prior. 

The company also increased fuel refining and chemicals and boosted outlays on discoveries in Guyana. Elsewhere, Chief Executive Officer Darren Woods expects investments to go up to $25 billion this year, partly due to rising costs in the Permian and double-digit inflation.

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