Integrated energy giant ExxonMobil (NYSE:XOM) recently reported third-quarter results, and the headline figures were lousy, with earnings falling by roughly 50% year over year. Right now, however, that's not the number to watch. If you are looking at Exxon, the most important number in the third-quarter earnings report is a bit deeper in the news release.

Here's why there's still a reason to be positive about Exxon, even though earnings looked terrible.

Oil is volatile

It should come as no surprise that Exxon's top and bottom lines vary along with the prices of oil and natural gas, two of the biggest contributors to its financial results. Energy prices, however, are highly volatile, a fact that has been on clear display throughout 2019. And while the price of oil is well off the roughly $30 lows it fell to after the mid-2014 oil crash, the roughly $50-to-$60 range in which oil has been trading lately is a tough one in which to make a profit. In other words, nobody was particularly shocked to see Exxon turn in a weak quarter.

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That's not the only story here, however. A rough quarter (or year) is one thing, especially for a company that has a rock-solid balance sheet like Exxon (financial debt to equity is a very modest 0.15 times today). But Exxon is currently in the middle of a huge ramp-up in capital spending. In fact, spending to expand production could push the oil giant's annual capital investment budget up to as much as $35 billion a year through 2025. Through the first nine months of 2019, Exxon's capital spending was up 25% over the same span in 2018. Increasing spending in the face of volatile oil prices is a bold move -- many smaller industry players are actually pulling back right now, particularly in the U.S. onshore space.

The important number

To be fair, Exxon has the balance sheet strength to increase spending during an oil market weak patch. That's one of the reasons why it has long focused on keeping its leverage low. This specifically allows it to keep spending even when times are tough. But taking a countercyclical approach like that requires investors to think a little differently. Exxon is spending a lot of money that it can afford to spend. The bigger question should be, "Is the spending paying off?"

The quick answer is yes, it looks like Exxon's investments are starting to bear fruit. Specifically, in the third quarter production increased roughly 3% year over year. That comes on top of a 7% year over year increase in the second quarter and a 2% jump in the first quarter. In other words, production looks like it is responding to Exxon's spending and starting to head in the right direction.

That said, everything wasn't great in the quarter on the production front. Production declined just slightly (0.3%) compared to the second quarter. Second-quarter production was down nearly 2% sequential from the first quarter. (The first quarter, however, saw a roughly 2% sequential increase from the fourth quarter of 2018.) Clearly, Exxon still has some more work to do, which helps explain why the stock has lagged behind that of fellow U.S. energy giant Chevron so far in 2019, and although a recent asset writedown may change things somewhat, Chevron still appears to be working from a stronger position than Exxon right now. In particular, Chevron's production has generally been on a solid upswing lately.

XOM DATA BY YCHARTS

Before getting overly pessimistic, however, it pays to dig another layer down. Most of Exxon's recent production strength has come from investments in the U.S. onshore drilling space. These wells are relatively quick to drill, and can have a swift impact on production. But they aren't the only arrow in Exxon's quiver -- it also has a number of offshore projects in the works. Offshore investments take longer to get up and running, but tend to have low operating costs and long reserve lives. And there's positive news on both of these fronts.

In the onshore space, while Exxon's production is up nearly 80% from the third quarter of 2018, management still expects to more than double the current figure by 2025. So it looks like there will be more production growth from this segment in the years ahead. Within the offshore space, Exxon continues to find new oil opportunities in the areas where it is drilling, increasing the company's oil reserves (oil it thinks it will be able to extract in the future). This makes its big spending projects in areas like offshore Guyana increasingly valuable.

Although it will take time to get all of the oil wells it has planned in the offshore space up and running, it looks like Exxon will have years of production growth ahead of it. In fact, Bank of America Merrill Lynch recently suggested that production from Guyana, which it expects to see start in late 2019, will lead to seven or eight years of solid company-wide production growth. And there's other big projects on the drawing board at Exxon, too, in Mozambique and Papua New Guinea. So, in the end, there appears to be plenty of good news hidden underneath that terrible earnings number.