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IEEFA update: ExxonMobil’s dismal third quarter

October 30, 2020
Kathy Hipple and Clark Williams-Derry and Tom Sanzillo and Seth Feaster

ExxonMobil Low Cash FlowExxonMobil today posted third quarter cash results that were significantly worse than those of its four peers, Shell, Total, BP and Chevron. These disappointing results challenge the company’s repeated claims that the fundamentals of the oil and gas industry have not changed. 

“ExxonMobil needs a business model that manages decline, generates stable profits and contributes to a solution to the world’s climate and energy challenges,” said Tom Sanzillo of the Institute for Energy Economics and Financial Analysis (IEEFA). “The constant refrain that ‘industry fundamentals are solid’ is just wrong.”

ExxonMobil has responded to low oil prices by cutting staff and slashing capital spending. At the beginning of 2020, the company projected that it would spend $33 billion on capital projects during the year, but has now trimmed that projection to $23 billion. ExxonMobil expects to reduce capex still further next year, to $16-19 billion. 

Despite cuts in capital spending, ExxonMobil’s $1.1 billion in free cash flow trailed its peers, and failed to cover the company’s $3.7 billion dividend payments. The resulting $2.6 billion cash shortfall was also the worst among ExxonMobil competitors. Chevron posted a shortfall of $0.5 billion, while Shell, BP, and Total, produced sufficient free cash flow to fund their dividends. 

In announcing its third consecutive quarterly loss, ExxonMobil also announced it would not raise its dividend for the first time in nearly 40 years. Yet the company’s free cash flows have now failed to cover dividends for seven consecutive quarters. This poor cash performance raises troubling questions about whether it is prudent for ExxonMobil to sustain its current level of dividends.  

 

Kathy Hipple (khipple@ieefa.org) is an IEEFA financial analyst.

Clark Williams-Derry (cwilliamsderry@ieefa.org) is an IEEFA energy finance analyst.

Tom Sanzillo (tsanzillo@ieefa.org) is IEEFA’s director of finance.

Seth Feaster (swfeaster@ieefa.org) is an IEEFA energy data analyst.

 

Recent items:

IEEFA update: ExxonMobil says the long-term fundamentals have not changed. Really?

IEEFA report: Leader To Laggard ExxonMobil’s Financial Troubles Intensify

IEEFA brief: Beyond Their Means: Oil Majors Pay More to Shareholders Than They Earn by Selling Oil and Gas

Kathy Hipple

Former IEEFA Financial Analyst Kathy Hipple is a founding partner of Noosphere Marketing and the finance professor at Bard’s MBA for Sustainability. She worked for 10 years with international institutional clients at Merrill Lynch and then served as CEO of Ambassador Media.

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Clark Williams-Derry

Clark Williams-Derry focuses on the finances North America’s oil, gas, and coal industries. His areas of expertise include: the long-term financial performance of North American oil & gas companies, particularly fracking-focused enterprises; company- and basin-specific studies of oil and gas production; U.S. LNG exports in the context of global markets; and U.S. and Canadian coal export projects.

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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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Seth Feaster

Seth Feaster is an energy data analyst whose work focuses on the coal industry and the U.S. power sector.

Before joining IEEFA, he created visual presentations at the New York Times for 25 years with a focus on complex financial and energy data; he also worked at The Federal Reserve Bank of New York. 

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