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Oil giant and Dow-30 component Exxon Mobil (XOMFree Exxon Mobil Stock Report) has reported first-quarter earnings of $9.5 billion, or $2.00 a share, slightly lower than our estimate of $2.05 and below net of $2.14 generated in the year-earlier period. The downtick was largely attributable to lower profits from the oil and gas producing business and a smaller contribution from the chemicals line, somewhat offset by improved results from refining and marketing operations. Although a very good report overall, Exxon Mobil stock traded modestly lower on the slight earnings miss.

The company's pumping division, or upstream, continues to be the main cog in the machine, accounting for more than 75% of income (before corporate expenses). Combined oil and natural gas production fell more than 5%, however, extending the moderate slide that became noticeable in late 2011. Asset sales, the effect of higher prices on entitlement volumes, and OPEC quota effects diminished volume on the oil side. Higher costs hurt results, too. Exxon's significant spending to check the production slump may pay off eventually, though. In the quarter, the company invested $8.8 billion on projects, mainly on the upstream side of the business.

Elsewhere, the performance of refining and marketing operations was helped by improved volume and a better product mix, in addition to some asset sales. Earnings from the chemicals manufacturing unit fell notably, though, on weaker margins.

During the quarter, Exxon maintained its shareholder-friendly practice of buying back stock. The effectiveness of repurchases may be debatable elsewhere, but there is little doubt as to the punch they carry here. Over the years, the company has bought back all of the stock it used to buy Mobil and, more recently, XTO Energy. Shares repurchased in the first quarter of 2012 totaled 66 million, for $5.7 billion. Exxon doesn't disclose how much stock it plans to buy in any given year, but we figure cash flow will be sufficient to keep the initiative going. The company has also increased the quarterly dividend much more than usual, to $0.57 a share, up 21% from the most recent distribution.

At this time, we are maintaining our 2012 earnings estimate of $8.25 a share, which would mark a 2% decline from last year's tally, due to the prospect of slightly narrower refining margins. Looking ahead, bottom-line growth should resume in 2013, with share net rising 6%, to $8.75. Furthermore, this high-quality (Safety: 1) stock should appeal to conservative, long-term investors, and the decent dividend yield sweetens the pot.

About The Company:Exxon Mobil Corp. is the largest publicly traded oil company in the world. It also owns 69.6% of Imperial Oil (Canada). Daily production in 2011 was as follows: crude oil, 2.4 million barrels (+1% vs. ’10); natural gas, 12.1 billion cubic feet (+31% vs. ’10). The average realized 2011 prices in the U.S. were: oil, $55.54 per barrel; natural gas, $3.85 per mill. cubic feet. Reserves as of 12/31/11 were 24.8 billion barrels of oil equivalent, 47% oil, and 53% gas. The reserve life at current production rates is about 15 years. The 10-year average reserve replacement rate is 121%. The daily refinery runs in 2011 were as follows: 5.3 million barrels (-2% vs. ’10); product sales, 6.4 million barrels (flat vs. ’10); chemical sales, 25.9 million tons.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.