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Exxon Can’t Catch a Break


Exxon Mobil may need anticipated a hearty pat on the again after Friday’s earnings announcement. It didn’t get one from buyers.

By many measures, the corporate’s outcomes look stronger than they’ve in awhile with oil costs at ranges not seen since 2018. ExxonMobil posted $4.7 billion in quarterly profit, its strongest in no less than a yr and beating Seen Alpha’s analyst consensus by greater than 10%. Its $9.7 billion of money circulation from operations was the very best it has been in virtually three years and adequate to cowl dividends, capital investments and debt discount. The numbers look particularly flattering in contrast with the identical three-month interval final yr, when the world confronted an unprecedented glut of crude and costs briefly went destructive.

Not all segments posted document outcomes, however the quarter underscored the benefit of an built-in power enterprise. Downstream earnings have been weak due to a sluggish restoration in jet-fuel demand at the same time as Exxon’s chemical compounds section posted its best-ever quarter of earnings. Chemical compounds have been Exxon’s saving grace since final yr when demand for packaging and hygiene merchandise spiked. Demand from the automotive business, which is itself recovering from its personal provide crunch, is bettering, too.

However Exxon has much less flexibility than friends due to a brutal 2020 and years of overspending. It’s dedicated to retaining its capital expenditures this yr on the decrease finish of its beforehand telegraphed vary of $16 billion to $19 billion. Debt ranges have come down from the document highs reached final yr, however it’s going to take a while to ponder splashier money returns. That would develop into a sore level: This week, European majors Royal Dutch Shell and TotalEnergies and U.S. peer Chevron all introduced a return to share buybacks.

Questions additionally stay over how Exxon plans to allocate long-term capital going ahead, particularly with a brand new board make-up after activist investor Engine No. 1 received three seats in Could. Chief Government Officer Darren Woods mentioned on a Friday morning earnings name that the corporate has had “productive discussions” with the brand new board. Whereas the corporate confused the necessity to handle the power transition, it didn’t lay out any extra substantive particulars past beforehand introduced plans to spend money on carbon seize, hydrogen and biofuels.

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