ExxonMobil risks not coping with the buyback
ExxonMobil’s (XOM) adjusted EPS for the first quarter was lower than forecast. At the same time, the largest US oil and gas company reduced its debt by $4.5 billion and increased the repurchase program to $30 billion by the end of 2023. Due to the increase in hydrocarbon prices, ExxonMobil’s revenue for the reporting period increased by 53% YoY and by 6.5% QoQ, reaching $90.5 billion. However, the operational indicators were not as impressive. Oil and gas condensate production increased by 0.4% YoY, decreasing by 5% QoQ and amounting to 2,266 thousand barrels per day. Gas production decreased by 7.9% YoY and by 1.5 sq/sq, to 8.5 billion cubic feet per day. Sales of petroleum products rose 5.7% from last year to this year, but they fell 4.3% from last quarter to 5.2 million barrels per day.
Sales volumes of petrochemical products increased by 4.5% YoY to 6.74 million tons (+0.5% QoQ). ExxonMobil’s adjusted profit for January-March of this year reached $8,833 million compared to $2,761 billion a year earlier (+0.4% QoQ). At the same time, earnings per share fell short of consensus by 7.2% and amounted to $2.07. Pressure on the company’s results was exerted by an increase in the cost of raw materials for the refining and petrochemical segments, whose profits fell by 77% and 30% QoQ, respectively. In the first three months of the year, $3.4 billion worth of assets were written off in Russia.
At the same time, operating cash flow excluding changes in working capital increased from last year’s $7.3 billion to $13.7 billion, while at the same time, in a quarterly comparison, the indicator decreased by 9.8%. Capital expenditures increased by 59% YoY, to $4.2 billion. ExxonMobil plans to increase its investment program from $16.6 billion in 2021 to $21.24 billion. From 2022 to 2027, the company says it will spend $20–25 billion a year on new projects, including $15 billion in “low-carbon” investments, or $2.5 billion a year.
The structural reduction in operating costs was $1.9 billion last year, $3.1 billion the year before, and may reach $4.4 billion this year. ExxonMobil’s net debt decreased by 11% QoQ to $36.4 billion at the end of the quarter. The volume of cash and equivalents on the company’s accounts reached $11.1 billion. The corporation’s quarterly dividend will be $0.88 per share, with a yield of 4.1% per annum ri (cut–off – May 12, payment – June 10). In the reporting period, ExxonMobil conducted a buyback in the amount of $2.1 billion. For 2022–2023, the repurchase program will be $30 billion, which is 7.6% of the company’s capitalization minus the amount of shares repurchased in January–March.
We are neutral in our assessment of ExxonMobil’s results for the first quarter. An increase in the asset repurchase program will support XOM quotes. However, in our opinion, the paper is overvalued by the market. Prices of hydrocarbons could rise to $60 per barrel of WTI if supply and demand are balanced with the normalization of the geopolitical situation. If this happens, the company will not be able to buy back its own shares.
