August 31, 2020 Read More →

ExxonMobil dropped from Dow Jones Industrial Average

The Fuse:

For the first time in nearly a century, ExxonMobil will no longer be listed on the Dow Jones Industrial Average, edged out by software company Salesforce.com.

The toppling of the supermajor is illustrative of many things at once: the financial pressure and poor performances across the energy sector, the clean energy transition, but also ExxonMobil’s own particular set of problems. The trends have been unfolding for years, but have been magnified by the global pandemic.

The latest blow to Exxon comes after two consecutive quarters of financial losses. Exxon posted $4.4 billion in negative free cash flow in the second quarter, and refused to touch its dividend, hoping to maintain its reputation as an attractive investment case. The flip side is that Exxon has had to pile on debt in order to afford those shareholder distributions. During the second quarter, the company added $16 billion in long-term debt as it paid out $8.1 billion to shareholders, according to a recent report from the Institute for Energy Economics and Financial Analysis (IEEFA).

To be sure, this problem is not new. “For more than a decade, the five largest publicly traded oil and gas companies—ExxonMobil, Shell, Chevron, Total and BP—have paid more to their shareholders than they’ve generated from their operations,” IEEFA analysts wrote. Still, the pandemic has substantially widened this gap. 

[Nick Cunningham]

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