Exxon Mobil: It's All About Free Cash Flow
Richard Zeits • 86 Comments
Richard Zeits • 86 Comments
Exxon Mobil: Slow But Steady, Value Erosion Is Underway
Richard Zeits • 111 Comments
Richard Zeits • 111 Comments
Yesterday, 7:55 AM
- April monthly performance was: +0.42%
- $0.19 in dividends were paid in April
- Top 10 Holdings as of 3/31/2016: Exxon Mobil Corporation (XOM): 3.51%, AT&T Inc (T): 3.5%, Microsoft Corp (MSFT): 3.01%, Apple Inc (AAPL): 2.86%, Verizon Communications Inc (VZ): 2.85%, General Electric Co (GE): 2.34%, Chevron Corp (CVX): 2.27%, Johnson & Johnson (JNJ): 2.27%, Procter & Gamble Co (PG): 1.95%, Wal-Mart Stores Inc (WMT): 1.85%
Sun, May 1, 1:08 PM
- A new study finds that fracking of U.S. shale fields is causing a global surge in ethane emissions. Ethane is known to contribute to global warming and dangerous air pollution.
- Global ethane levels had been falling since the 1980s, but in 2010 a sensor in Europe picked up a surprise increase. U.S. shale fracking was thought to be the culprit. More recently, a single field in the North Dakota and Montana Bakken Formation has been found to be emitting 2% of the worldwide total.
- "Two percent might not sound like a lot, but the emissions we observed in this single region are 10 to 100 times larger than reported in inventories. They directly impact air quality across North America. And they're sufficient to explain much of the global shift in ethane concentrations," said Eric Kort, the first author of the new study published in Geophysical Research Letters.
- Ethane emissions from other U.S. fields, especially the Texas Eagle Ford, likely contributed as well, the research team says. The findings illustrate the key role of shale oil and gas production in rising ethane levels.
- Baaken stocks include: CLR, ERF, EOG, HK, HES, MRO, OAS, QEP, SM, STO, TPLM, WLL
- Eagle Ford stocks include: APC, APA, COG, CRZO, CHK, COP, ECA, XOM, MUR, PXD
- See the full study here »
Fri, Apr. 29, 3:38 PM
- While the four oil majors reporting this week - Exxon (XOM +0.4%), BP, Total, and Chevron - were bailed out by their downstream businesses (only Chevron missed estimates), they're still borrowing heavily to fund capex and the dividends upon which they've staked their reputations, writes Liam Denning.
- Combined free cash flow for the trailing four quarters stands at negative $39B.
- While Exxon isn't the worst of the bunch, S&P did take away its AAA rating earlier this week. In true Exxon fashion, the company responded with a dividend hike, this morning's earnings release made no mention of the rating change, and the earnings call had plenty of reminders of the company's long history of dealing with good and bad times.
- But CEO Rex Tillerson is set to retire within a year, and it looks like he'll turn over a weaker company than the one he inherited from Lee Raymond. Along with the rating cut, the company didn't replace reserves last year for the first time in more than 20 years, paid $35B for XTO Energy at the peak in natural gas prices, inked an ill-timed partnership with Rosneft, and hasn't really grown oil and gas production.
- As part of its ratings cut, S&P cited worry about Exxon's ability to replace reserves as debt climbs. Without production growth, notes Denning, how do you square rising leverage with a commitment to raising dividends, not to mention restarting buybacks (barring, of course, a big rebound in oil prices)?
Fri, Apr. 29, 8:36 AM
- Q1 earnings of $1.81B or $0.43 per share way down from $4.94M and $1.17 a year ago, but nevertheless beating estimates by $0.12.
- Capex spending of $5.13B down 33% Y/Y. Full-year capex guidance was previously set at $23.2B.
- Production up 1.8% Y/Y, with liquids production of 2.5M barrels per day up 261K bpd, and natural gas production of 10.7B cubic feet per day down 1.1B.
- U.S. upstream operations loss of $832M vs. a $52M loss one year ago. Non-U.S. upstream earnings of $756M down $2.2B Y/Y.
- Downstream earnings of $906M down $761M from a year ago, with weaker margins at work.
- Chemical earnings of $1.4B up $373M Y/Y thanks mostly to improved margins.
- 9M shares repurchased during quarter for $726M, offsetting dilution from stock-based pay.
- Conference call at 9:30 ET
- XOM +0.25% premarket
Fri, Apr. 29, 8:01 AM
Thu, Apr. 28, 5:30 PM| Thu, Apr. 28, 5:30 PM | 3 Comments
Wed, Apr. 27, 7:11 PM
- The long-coveted AAA credit rating doesn't seem to mean as much as it used to for Exxon Mobil (NYSE:XOM) and its investors, as the company raised its quarterly dividend one day after Standard & Poor's downgraded XOM, citing generous payouts to shareholders.
- With interest rates so low, many companies would rather borrow more to fund items such as shareholder returns than maintain a top rating, and XOM has hiked its dividend for 34 consecutive years.
- However, the dividend increase was just 2.7%, the smallest raise since at least Q1 2006, when the dividend rose 10%.
- At a combined $325B in dividends and repurchases, XOM's spending on shareholders in the last 11 years has exceeded by nearly 20% its outlays of $271.7B for new property, plant and equipment over the same period, according to Reuters.
- Now read Big Oil may have to cut dividends, Goldman's Currie says
Wed, Apr. 27, 2:49 PM
Tue, Apr. 26, 6:45 PM
- Goldman Sachs global head of commodities research Jeff Currie says oil prices may stay low enough for long enough to force Exxon Mobil (NYSE:XOM) and its big oil peers to cut their dividends.
- Goldman sees oil prices ending the year at $45/bbl, and "if we stay in a $50-$60-type price environment most of these companies have embedded in their outlooks, it's going to be very difficult to actually make those types of dividend payments" that were structured when oil prices were much higher.
- Other analysts believe the majors have brought down costs enough to fund dividends; Cowen says "operational efficiencies, cost reduction, and asset sales should allow [integrated oil companies] to sustain dividends and bridge the funding gap through 2017."
- ConocoPhillips (NYSE:COP) cut its dividend by two-thirds earlier this year, while Chevron (NYSE:CVX) and XOM have maintained their respective 4.2% and 3.3% payouts but have suspended stock buybacks.
- BP, which reported better than expected Q1 earnings today, maintained its dividend but RBC Capital warns that tighter margins in BP's downstream refining business combined with weakness in its upstream gas exploration segment could make its dividend unsustainable.
- Now read Exxon loses AAA credit rating from S&P
Tue, Apr. 26, 11:49 AM
- Exxon Mobil (XOM +0.2%) loses the AAA credit rating from Standard & Poor's it held since the 1930s, as the ratings agency downgrades XOM to AA+ and says the company’s greatest business challenge is replacing its ongoing production.
- "We believe Exxon Mobil's credit measures will be weak for our expectations for a 'AAA' rating due, in part, to low commodity prices, high reinvestment requirements, and large dividend payments," S&P says.
- S&P maintains a stable outlook on XOM but says the company's debt level had more than doubled in recent years, reflecting high capital spending and dividends as well as share repurchases that substantially exceeded internal cash flow.
- Now read Why lower oil prices could be a boon for Exxon Mobil
Fri, Apr. 22, 8:13 AM
- Australia's competition regulator says it wants to break up a marketing joint venture between Exxon Mobil (NYSE:XOM) and BHP Billiton (NYSE:BHP) to help boost competition in the eastern Australian gas market.
- Suppliers have "taken advantage" of potentially lower gas supply by raising prices and placing onerous conditions on buyers, the Australian Competition and Consumer Commission concludes following a year-long probe.
- The commission says one possible step to help deal with the problem for end users would be to consider ordering XOM and BHP to sell gas separately; XOM says such a move would increase costs, and BHP notes that the joint venture has been producing for more than 45 years and has served the market well.
- Now read A big opportunity for Exxon Mobil
Thu, Apr. 21, 6:17 PM
- Alberta's provincial government releases technical formulas for its new oil and gas royalty framework, a move welcomed by the energy industry as providing clarity to potential investors and enabling producers to move forward with drilling and investment plans.
- Analysts say the technical formulas are a net positive for producers by basing well cost allowances on the 2012-15 period when costs were higher, but oil prices - and whether they recover or continue to languish near $40/bbl - would have a much greater impact on investment decisions in Alberta than the royalty structure.
- Alberta's new NDP government unveiled its new royalty framework in January which left rates largely unchanged on oil sands projects and existing wells.
- Relevant tickers: SU, CVE, OTCPK:HUSKF, RDS.A, RDS.B, IMO, XOM, CNQ, ENB, TRP, PDS, OTCPK:MEGEF
- Now read Which Canadian mid-cap pipelines pay out safe dividends?
Tue, Apr. 19, 11:58 AM
- Two liquefied natural gas projects in Papua New Guinea are pressing on even in the current supply glut in their effort to sign off on new developments by 2018 to take advantage of a drop in construction costs and high quality gas, Reuters reports.
- Total (TOT +2%) said this week it could build PNG's second LNG plant for $10B, at least 25% below analyst estimates, while Oil Search (OTCPK:OISHF) said it expected new projects would have no trouble attracting lenders.
- Exxon Mobil (XOM +0.2%) also is weighing an expansion of its PNG LNG plant, which has been exporting for two years and is now producing at a rate of 8M metric tons/year.
- Oil Search wants the Papua LNG and PNG LNG projects to work together, to prevent wasting money the way LNG producers have on the east coast of Australia building three competing projects side by side.
- Now read The geopolitics of cheap energy
Tue, Apr. 19, 10:23 AM
- Exxon Mobil (XOM +0.2%) says oil production has started under budget and ahead of schedule at the Julia oil field in the Gulf of Mexico.
- XOM says the first production well is now online, a second well will start production in the coming weeks, and a third well is expected to come online early in 2017; production results will assist in the evaluation of additional wells included in the initial development phase, which has a design capacity of 34K bbl/day of oil.
- Operator XOM and Statoil (STO +3.3%) each hold a 50% interest in the Julia development, which is located 265 miles southwest of New Orleans in water depths of more than 7K ft.
- Now read Is Exxon Mobil still a buy?
Mon, Apr. 18, 7:25 PM
- Bloomberg's Liam Denning makes the case for Exxon Mobil (NYSE:XOM) as the real winner in the failure to reach a production freeze at Doha, as the company is well equipped to weather what is likely to be a volatile few quarters in the oil market.
- For starters, Denning says the highly levered sectors of the oil industry no longer will be lifted by freeze hopes and instead must sink or swim based on market fundamentals, an environment that should help XOM.
- XOM now can hope that weaker petro-states will be forced to soften the resource nationalism that has kept western oil majors away from reserves on economic terms for much of the past decade or so, Denning writes.
- More tangibly, XOM has said it is looking at possible acquisitions but that potential targets have unrealistic expectations on price, which likely will soften now, according to Denning, adding that when XOM finally makes its move, it will be "a reasonably good sign that a sustainable rally, not one based on ministerial mutterings, is underway."
- Now read Exxon eyes stand-alone asset acquisitions at the right price, CEO says
Mon, Apr. 18, 10:25 AM
- The energy sector (XLE +0.1%) pokes into the green as crude oil prices pare earlier losses even after the collapse of the Doha meeting, and it's a mixed bag among the top global oil companies in early trading: XOM +0.1%, CVX +0.3%, RDS.A -0.9%, BP -0.3%, TOT -0.4%.
- Kuwait may have achieved what Doha failed to do, at least in the short term, as a labor strike that began Sunday has cut the country's production by 60%, shuttering 1.7M bbl/day, slightly more than H1's global surplus that caused prices drop to a 12-year low in January.
- Some oil analysts say the lack of a Doha deal is better for oil prices in the long run now that the rebalancing process of supply and demand can continue to its natural conclusion.
- Other noteworthy names: KMI -0.1%, CHK -4%, MRO -1.4%, COP +0.1%, SLB +0.2%, HAL +0.2%, BHI -0.7%, OXY +0.5%, APC -0.1%, HES +0.6%, ENB +0.8%, ETP -0.4%, EPD +1.5%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, PXI, FIF, PXJ, RYE, NDP, GUSH, PSCE, DRIP, DDG, FXN
- Now read No deal! Our 'enfant terrible' Saudi Arabia did it again
Exxon Mobil Corp. engages in the exploration, development, and distribution of oil, gas, and petroleum products. It operates through the following segments: Upstream, Downstream, and Chemical. The Upstream segment produces crude oil and natural gas. The Downstream segment manufactures and trades... More
Sector: Basic Materials
Industry: Major Integrated Oil & Gas
Country: United States
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