Tripling buybacks while exiting Russia—a bet that high prices are here to stay
In the first quarter of 2022, Exxon Mobil found itself at a crossroads familiar to empires in transition: profitable yet falling short of expectation, retreating from one frontier while advancing toward others. The company doubled its earnings year-over-year, but a $3.4 billion writedown from abandoning its Russian operations — a consequence of Moscow's invasion of Ukraine — and volatile refining margins left Wall Street wanting more. Rather than retreat, Exxon answered with ambition, tripling its share buyback program to $30 billion, a gesture that speaks less to present certainty than to a calculated wager on the durability of high energy prices in an unsettled world.
- Exxon doubled its profits year-over-year yet still missed analyst expectations, exposing the gap between raw earnings and the market's ever-rising bar.
- A $3.4 billion writedown from exiting Russia's Sakhalin-1 field — one of the company's most productive assets — landed as an immediate and unavoidable blow to quarterly results.
- Refining operations collapsed from $1.5 billion to $332 million in a single quarter, as wild swings in crude prices trapped the company between the cost of buying feedstock and the price of selling finished fuel.
- Inflation and market volatility squeezed margins across the sector, with Exxon absorbing $760 million in mark-to-market derivative losses that management promised would eventually reverse.
- Exxon tripled its buyback program to $30 billion and pivoted its production focus to the Permian Basin and Guyana, signaling a strategic repositioning rather than a retreat.
- Investors remained skeptical, sending shares down 1.1 percent in premarket trading — a reminder that confidence, once priced in, demands constant proof.
Exxon Mobil entered the first quarter of 2022 with earnings nearly double those of the prior year — $5.48 billion against $2.73 billion — and yet the results still disappointed. Adjusted earnings of $2.07 per share fell short of the $2.12 analysts had forecast, and revenue of $90.5 billion missed the $92.7 billion consensus. The surface looked strong; the details told a more complicated story.
The most dramatic charge came from Russia. Exxon had operated the Sakhalin-1 offshore field in the country's Far East for years, a steady source of production and cash. After Moscow's invasion of Ukraine on February 24, the company joined BP and Shell in withdrawing from Russian assets, absorbing a $3.4 billion after-tax writedown in the process. The loss was real, though manageable against a backdrop of surging global oil prices.
Elsewhere, the quarter revealed how volatile markets can punish even profitable companies. Exxon's refining division — which converts crude into gasoline and other products — earned just $332 million, down from $1.5 billion the previous quarter. The culprit was timing: when crude prices spike between the moment a refinery buys its feedstock and the moment it sells finished fuel, the company absorbs the difference. Price swings cost Exxon $1.3 billion, including $760 million in mark-to-market losses on derivatives. Management noted those losses would reverse upon physical settlement, but the quarterly damage was immediate.
Rather than signal caution, Exxon responded with a striking show of confidence: it tripled its share buyback program to $30 billion, to be completed by the end of 2023. The move echoed decisions by other energy majors betting that high oil and gas prices will endure. Meanwhile, the company redirected its production ambitions toward the U.S. Permian Basin and Guyana, where two major offshore developments offered the prospect of growth to replace what was lost in Russia and in aging fields elsewhere.
Investors were not moved. Exxon's stock slipped 1.1 percent in premarket trading, a quiet verdict suggesting the market had already absorbed the sector's strength and was now watching to see whether the company could navigate geopolitical risk, inflationary pressure, and volatile markets all at once — a test that no buyback announcement alone can answer.
Exxon Mobil reported first-quarter earnings of $5.48 billion on Friday, nearly double the $2.73 billion it made in the same period a year earlier. The numbers looked strong on the surface—per-share profit had doubled to $1.28 from 64 cents. But Wall Street had expected more. Even setting aside a $3.4 billion writedown from abandoning its Russian operations after the invasion of Ukraine, the company's adjusted earnings of $2.07 per share fell short of the $2.12 analysts had forecast. Revenue came in at $90.5 billion, below the $92.7 billion consensus.
What caught attention was not the earnings miss but what Exxon chose to do with its cash. The company announced it would triple its share buyback program, committing to repurchase up to $30 billion in stock by the end of next year—up from its previous target of $10 billion. The move mirrors decisions by other energy giants like TotalEnergies, all of them betting that high oil and gas prices will persist and returning capital to shareholders rather than plowing it back into new exploration or production.
The quarter revealed the peculiar pressures facing oil majors in a volatile market. Exxon's refining division, which turns crude into gasoline and other products, posted earnings of just $332 million, a stunning collapse from $1.5 billion in the fourth quarter. The culprit was the wild swings in energy prices. When crude costs spike between the moment a refinery buys feedstock and the moment it sells finished fuel, the company absorbs the loss. In this case, price volatility cost Exxon $1.3 billion, including $760 million in mark-to-market losses on derivatives positions. The company said those losses would eventually reverse when it completed physical sales, but the damage to quarterly results was immediate and severe.
Anish Kapadia, energy director at consultancy Palissy Advisors, attributed the weakness across the sector to two forces: extreme market volatility and the rising cost of doing business. Both Chevron and Exxon had felt the sting in their downstream operations—the refining and marketing side of the business—as prices whipsawed through the quarter. Inflation was beginning to bite as well, squeezing margins even as crude prices climbed.
The Russia exit itself was a significant charge. Exxon had operated the Sakhalin-1 offshore field in Russia's Far East, a major asset that generated steady production and cash flow. After Moscow's invasion of Ukraine on February 24, the company announced it would withdraw, taking the $3.4 billion after-tax hit in the first quarter. Exxon joined BP and Shell in a mass exodus from Russian energy assets. BP had flagged up to $25 billion in writedowns; Shell up to $5 billion. For Exxon, the loss was real but manageable against the backdrop of surging oil prices that had lifted overall profitability.
Production numbers told a story of transition. Exxon's output of crude and other liquids—including bitumen and synthetic oil—fell 5 percent from the previous quarter to 2.3 million barrels per day. Natural gas production dropped 1.5 percent. The company was redirecting its focus toward what it saw as more promising frontiers: the U.S. Permian Basin, where shale production could be ramped up relatively quickly, and Guyana, the small South American nation that had emerged as an unexpected oil bonanza in recent years. Exxon had two major offshore developments underway there, betting that new discoveries would offset the loss of Russian production and the mature fields it was managing elsewhere.
Investors appeared unmoved by the earnings beat and the aggressive buyback announcement. Exxon's stock fell 1.1 percent to $86.25 in premarket trading, suggesting the market had already priced in strong energy sector results and was waiting to see whether the company could execute on its growth plans while navigating a landscape of geopolitical risk, volatile markets, and rising costs.
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The market is very volatile now. You are also starting to see the cost of inflation affecting companies.— Anish Kapadia, energy director at Palissy Advisors
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Why did Exxon miss earnings estimates if oil prices were so high?
The miss was narrow, but it happened because of two things working against them. Market volatility in refining—the gap between what they paid for crude and what they could sell finished products for—cost them $1.3 billion. And revenue fell short because of the overall market conditions, not just their operations.
So the buyback announcement—tripling it to $30 billion—that's a sign of confidence?
It's a signal that management believes high oil prices are here to stay. Instead of investing that money in new wells or infrastructure, they're returning it to shareholders. It's a bet on the status quo.
But they just took a $3.4 billion hit from Russia. Doesn't that suggest uncertainty?
That's the paradox. The Russia exit was forced by geopolitics, not by weak fundamentals. The company is still profitable enough to triple buybacks despite the writedown. The real uncertainty is whether they can replace that Russian production with Guyana and Permian output.
What about the refining division collapsing from $1.5 billion to $332 million?
That's the volatility Kapadia mentioned. It's not structural decline—it's timing. When prices move fast, refiners get caught holding inventory at the wrong price. Those losses reverse eventually, but they hit the quarterly numbers hard.
Is Exxon in trouble?
Not in the near term. Oil is expensive, they're making money, and they're returning capital. The question is whether they can grow production in Guyana and the Permian fast enough to offset Russia and aging fields elsewhere. That's a three-to-five-year story.