Exxon Dividend Is ‘Very Safe’ After Surprisingly Sturdy Earnings, CEO Says
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achieved a serious milestone in its first-quarter earnings report, helped by rising oil costs and a slimmed-down enterprise mannequin. The corporate’s money stream coated its dividend and capital expenditures. Only a few months in the past, analysts have been speculating that Exxon might need to chop its dividend.
Exxon (ticker: XOM) on Friday reported adjusted earnings of 65 cents a share, a nickel forward of Wall Avenue estimates. Its income of $59 billion outpaced expectations for $56 billion.
The enhancements come within the nick of time. Exxon mentioned final yr that it wouldn’t tackle extra debt after Moody’s downgraded its issuer and senior unsecured rankings. It even stopped contributing to some worker retirement plans because it tried to cut back working prices.
Activist traders have pressured Exxon to slim down quicker and to transition its enterprise extra aggressively to a lower-carbon future. A fund referred to as Engine No. 1, backed by different traders 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 important areas that might have an effect on the proxy vote. The corporate’s working money stream of $9.3 billion allowed it to completely fund the dividend and capital bills, whereas additionally paying off $4 billion in debt. The corporate additionally says it decreased working bills by $3 billion final yr, and can reduce a further $3 billion this yr.
In an interview with Barron’s after the earnings name, CEO
mentioned that the corporate was ready to completely fund its dividend even when oil costs swing under $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 mentioned. “What we mentioned is at $50 a barrel, and as you progress out under, that we will proceed to pay the dividend and make the investments that we’d like, and start to rebuild the steadiness sheet.”
Exxon’s dividend yield is at 6%. Throughout the disaster, it had spiked above 10%, which could be a warning signal that traders anticipate a reduce.
“We really feel very safe, very assured, in paying the dividend primarily based on the plans we’ve obtained,” he added. “What we’re seeing as we speak is de facto quite a lot of upside.”
Actually, larger oil costs imply that Exxon can whittle away at its debt load quicker. It nonetheless has $63 billion in debt.
“What we’re doing as we speak with that extra income that we’re seeing with the market the place it’s at, is simply utilizing that to deleverage extra shortly,” Woods mentioned.
At noon on Friday, Exxon shares have been down 1.8%, to $57.90.
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