# The crudest of crude calculations

So I don’t want to get into the weeds here, and probably couldn’t really understand it all even if I did, but it occurred to me to run a gut check on the “excess” profits the oil producers are enjoying these days. Now these vast, sprawling enterprises have tens of thousands of moving parts: exploration, refining, transport, alternative fuels, foreign government appropriations, and more, but I’m going to ignore ALL of that in favor of this simple metric:

How much oil did Exxon produce last quarter, and how much was their profit?

`Exxon said its oil-equivalent production stood at 3.7 million barrels per day in the second quarter, a 4% increase from the first quarter. `
https://www.cnbc.com/2022/07/29/exxon-xom-and-chevron-cvx-ea…

3.7 million “equivalent” (whatever that means) barrels per day x 91 days = 336,700,000 bbls.

Each barrel produces about 20 gallons of gasoline, (about 50% of each barrel produces other stuff like diesel, kerosene, jet fuel, plastics, asphalt, lubricants, etc.)

So if I take 336,700,000 bbls x 20 gal = 6,734,000,000 gallons.

Now. Exxon profit for the quarter was 17.9B, or longhand \$17,900,000,000. Dividing profit into gallons I get \$2.66 per gallon profit . Can that be right? I feel like I must have slipped a decimal someplace or something.

https://corporate.exxonmobil.com/News/Newsroom/News-releases…

I know, I know, I’m not bothering with how much they spent on hydrogen research and writing off Russia and blah blah blah. Too much info, but is it possible that Exxon makes over \$2/gallon at the moment?

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I don’t see where you allowed for the cost of the original oil or the cost of refining it into gasoline. Without that the \$2 is revenue, not profit.

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Too much info, but is it possible that Exxon makes over \$2/gallon at the moment?

I don’t think so. I don’t think it’s a math error, but that you attributed their entire company’s product over just the amount of upstream production (the amount of oil they pull out of oilfields), rather than their entire operations.

If you scroll down the earnings report you cite, they break down their earnings into different segments. For the “upstream” segment, which is the production of those 3.7 moebpd discussed in the earnings release, they earned about \$11 billion. Meanwhile, 3.7 moebpd over 91 production days would constitute about 340 million barrels, giving XOM a profit of about \$32 per barrel. That’s roughly \$0.78 per gallon of crude (42 gallons in a barrel of oil).

Now, they also earned money in refining - but they refined far more product than they extracted. They refined about 5 mbpd over 91 production days, or about 455 million barrels. For that refining, they earned another \$5.3 billion - or another \$12 per barrel. That’s roughly \$0.28 per gallon of refined product.

Albaby

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So if I take 336,700,000 bbls x 20 gal = 6,734,000,000 gallons.
Now. Exxon profit for the quarter was 17.9B, or longhand \$17,900,000,000. Dividing profit into gallons I get \$2.66 per gallon profit.

You have to factor in how much of their earnings are from gasoline before dividing.

It’s easier just to look at quarterly profit margins. For example, for the first quarter of this year their profit margin was 8.4% and over the last five years it has averaged 4.1%
www.financecharts.com/stocks/XOM/summary/profit-margin#:~:te….

DB2

It’s easier just to look at quarterly profit margins. For example, for the first quarter of this year their profit margin was 8.4% and over the last five years it has averaged 4.1%

Interesting

But there is another better way of seeing it. If everything pretty much stayed the same cost wise and even the increase in production is marginal, then the real heart of the profit and profit per gallon is “the last dollar in is the most profitable”. With the price of oil being so high dollars are just falling to the bottom line.

Meanwhile, 3.7 moebpd over 91 production days would constitute about 340 million barrels, giving XOM a profit of about \$32 per barrel. That’s roughly \$0.78 per gallon of crude (42 gallons in a barrel of oil).

Now, they also earned money in refining - but they refined far more product than they extracted. They refined about 5 mbpd over 91 production days, or about 455 million barrels. For that refining, they earned another \$5.3 billion - or another \$12 per barrel. That’s roughly \$0.28 per gallon of refined product.

Thanks for providing some common-sense estimates.

One might also think of how much capital has been/and is being invested to provide these products.

And that these are a record quarter margin peaks in a very cyclic business. These numbers would look very different if averaged over a business cycle.

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btw, that is why software is a better investment.

I’d rather own Microsoft than Exxon. I’d rather do business with Microsoft than Exxon. Everyone has a better future with Microsoft than Exxon. We are possibly seeing a peak in Exxon and a long fade. Other peaks? Dependent on events can happen. Bottom line for investors Exxon’s business model is more news driven. This includes future news on batteries.

“Exxon said its oil-equivalent production stood at 3.7 million barrels per day in the second quarter, a 4% increase from the first quarter.”

That often includes Natural Gas and Natural Gas Liquids - a lower energy residual product.

“The barrel of oil equivalent (BOE) is a unit of energy based on the approximate energy released by burning one barrel (42 US gallons, 35 imp gal or 158.987294928 litres) of crude oil.”

“How do you convert gas to BOE?
1,000 cubic feet of natural gas (1 MCF) contains about 1/6 of the energy content of a single barrel of oil. Therefore 6 MCF (6,000 cubic feet of natural gas) equals 1 BOE.”

https://kimray.com/training/bbl-boe-btu-mcf-and-other-common…

Of course, XOM makes money selling diesel, jet fuel, kerosene, propane , plastic precursors and a hundred other refinery products they refine or produce.

There are over 100 grades of oil, from ‘the best’ being Brent Crude, to the lower and hard to refine oil sands oil from Alberta and Venezuela.

t

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… but it occurred to me to run a gut check on the “excess” profits the oil producers are enjoying these days.

Methinks you were correct to put quotes around excess in ““excess” profits”

The only people who think there is such a thing as “excess” profits are the people who aren’t making them.

I’m speaking here about true profits, not accounting tricks.

Desert (CVX, XOM, T, BNS, BKH, ED, ATGFF, NI, NWN, TRP, ENB, WRE, WGL, XEL, DUK, SO & KO) Dave

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