Although ExxonMobil Corp. (NYSE: XOM) saw its earnings fall by 63% during the first quarter of 2016, the company earned $1.8 billion, grew liquids production and pared down spending.

“ExxonMobil remains focused on creating value through each cycle. We’re advancing self-help initiatives, driving down costs, increasing efficiency, improving reliability and capturing incremental margin across an integrated portfolio,” Jeff Woodbury, vice president of investor relations and secretary for ExxonMobil, said on a conference call April 29.

The company’s liquids volumes rose 11% and capex fell by more than a third as the company’s bottom line benefitted from strong performance within its chemical and downstream segments.

ExxonMobil also:

  • Generated $5 billion in cash flow from operations and asset sales;
  • Earned $1.4 billion on gas and liquids cracking advantages, boosting chemical earning by 38%;Earned $906 million in global gasoline sales as “demand remains relatively strong;” and
  • Pushed up oil equivalent production by 1.8% with liquids up 11.5% to 2.5 MMbbl/d while gas production fell 9.3%.

The results were delivered as the oil and gas industry continues to cope with the short-term consequences of having produced more oil than currently needed. However, although supply is exceeds demand today, the world’s energy needs are forecast to grow long term. North America shale production is also seeing monthly declines as the market balances.

Looking at the last decade, Woodbury pointed out that overall demand has increased by about 1 MMbbl/d, or so, with demand growth in recent years exceeding 10-year demand growth predictions.

“It’s a good indication of a pretty healthy demand increase, very consistent with our outlook for energy with oil growing about 6/10ths of a percent per year and gas growing about 1.5% per year,” he said. “We have maintained a very disciplined capital allocation approach for the longer term horizon. That hasn’t changed, but we have been through these down cycles before. We built this business to be very durable in a low-price environment.”

The company remains committed to adding value while maintaining its dividend, which both require fiscal discipline.

Cutting Costs

The company has been unflinching in its willingness to make the cuts it needs. Capital and exploration expenses have dropped 33% to $5.1 billion for the quarter compared to the same period a year ago.

ExxonMobil’s capex for 2016 is down 25% to about $23 billion.

“The organization has not taken its foot off the pedal. They continue to work toward identifying capital efficiency opportunities. We’re still capturing market savings,” Woodbury said.

The company continues to deliver major projects on or ahead of schedule and within budget.

“All of that is translating into a capital savings that you’re seeing in the first quarter of this year,” he said.

Capex guidance remains the same.

But the company, like its peers, faced a business environment of what ExxonMobil called “global economic weakness” in the first quarter. Growth slowed in the U.S. and China whileJapan and Europe saw modest improvements. Despite minor rallies, commodity prices remained depressed with few signs of improvement.

With uncertainty now a principle among oil producers, ExxonMobil—like others companies—will take what the market deals it.

“We are price takers. We are not counting on price growth. What we are focused on is really maintaining a focus on the things that we can control in order to create margin,” Woodbury said.

The oversupply remains—about a 1.5 MMbbl/d more than demand for the first-half 2016. He said commercial inventories are still swelling and supply trend jitters remains in the near-term.

Helping matters perhaps is falling production in North America.

RELATED: Analysts: Oil Market Rebalancing Nears As Non-OPEC Production Falls

While ExxonMobil’s natural gas production fell from about 11.8 Bcf/d to about 10.7 Bcf/d, its net production of crude oil, NGLs, bitumen and synthetic oil increased to about 2.5 MMbbl/d in first-quarter 2016 from about 2.3 MMbbl/d last year.

Raising Production

Liquids production rose for the quarter in every region noted in the company’s earnings release, including the United States where liquids production grew to 500,000 bbl/d for the quarter, up nearly 6% from first-quarter 2015.

During the call, Macquarie analyst Iain Reid asked whether growing production, particularly in the Lower 48, is a deliberate decision to invest counter-cyclically. “Or is it something specific to your acreage where you’re getting more barrels out of your existing wells?” he asked.

He added, “Because you’re contributing to the problem rather than the solution if you’re growing your Lower 48 volumes.”

ExxonMobil is able to continue investing in the downcycle, Woodbury said. “That provides an opportunity for us to capture lower cost structure in the investments that we are making. Particularly, in the Lower 48 unconventionals, it’s allowed us to high-grade the rig activity.”

He pointed out that the company’s Lower 48 rig count has fallen to 16 from a peak of more than 60. “We continue to pursue the attractive unconventional opportunities that we have predominately in the Permian and Bakken, and we’re getting great value for it,” Woodbury continued. “It just shows the value proposition that ExxonMobil is able to provide because we have the capability to invest through the cycle.”

The mix of ExxonMobil’s longer- and shorter-cycle investments changed overtime as its Lower 48 inventory grew, Woodbury said. The way the company manages its business, however, has not changed at all, he said. Decisions are driven by how best to maximize shareholder value.

“All of these investments compete,” Woodbury said. “We’ve got a very, very deep inventory across the portfolio.

Velda Addison can be reached at vaddison@hartenergy.com.