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achieved a significant milestone in its first-quarter earnings report, helped by rising oil costs and a slimmed-down enterprise mannequin. The corporate’s money move lined its dividend and capital expenditures. Just some months in the past, analysts have been speculating that Exxon may need to chop its dividend.
Exxon (ticker: XOM) on Friday reported adjusted earnings of 65 cents a share, a nickel forward of Wall Road estimates. Its income of $59 billion outpaced expectations for $56 billion.
The enhancements come within the nick of time. Exxon stated final yr that it wouldn’t tackle extra debt after Moody’s downgraded its issuer and senior unsecured scores. It even stopped contributing to some worker retirement plans because it tried to cut back working prices.
Activist buyers have pressured Exxon to slim down sooner and to transition its enterprise extra aggressively to a lower-carbon future. A fund known as Engine No. 1, backed by different buyers like Calpers, is pushing Exxon so as to add 4 new unbiased board members, a proposal the corporate opposes.
However the first-quarter outcomes present an upswing in some essential areas that would have an effect on the proxy vote. The corporate’s working money move of $9.3 billion allowed it to totally fund the dividend and capital bills, whereas additionally paying off $4 billion in debt. The corporate additionally says it lowered working bills by $3 billion final yr, and can reduce an extra $3 billion this yr.
In an interview with Barron’s after the earnings name, CEO
stated that the corporate was ready to totally fund its dividend even when oil costs swing beneath $50 a barrel once more. On Friday, Brent crude futures, the worldwide benchmark, have been buying and selling at $67 a barrel.
“The plans that we put in place have been primarily based on a reasonably low crude worth,” Woods stated. “What we stated is at $50 a barrel, and as you progress out beneath, that we are able to proceed to pay the dividend and make the investments that we want, and start to rebuild the steadiness sheet.”
Exxon’s dividend yield is at 6%. Through the disaster, it had spiked above 10%, which could be a warning signal that buyers count on a reduce.
“We really feel very safe, very assured, in paying the dividend primarily based on the plans we’ve acquired,” he added. “What we’re seeing in the present day is admittedly plenty of upside.”
Actually, greater oil costs imply that Exxon can whittle away at its debt load sooner. It nonetheless has $63 billion in debt.
“What we’re doing in the present day with that further income that we’re seeing with the market the place it’s at, is simply utilizing that to deleverage extra rapidly,” Woods stated.
At noon on Friday, Exxon shares have been down 1.8%, to $57.90.
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