In their respective earnings reports, ExxonMobil and ConocoPhilips reported earnings that beat expectations. Then again, big energy names have had a good quarter overall: BP raised its dividend, while Royal Dutch-Shell also had a great number.
Exxon's oil and gas segment earnings outside the U.S. generated a billion dollars more than expected, boosted by a combination of higher crude prices, higher production, and a Canadian oil sands project. Downstream (refining), however, was notably weaker.
The problem with these big integrated companies is simple: the upstream (oil and gas) segments have lower revenue yet much higher margins. Downstream is the mirror opposite: much higher revenues with lower margins. Upstream activities generate roughly 80 percent of the earnings for the company.
With that said, it's almost impossible to grow a company of Exxon's size. They produce over 4 million barrels a day, and the decline rate is roughly 200,000—300,000 barrels a day, according to Oppenheimer. They need to find enough reserves, or buy companies, that produce 200,000-300,000 barrels a day just to stay even.