Exxon Targets $10 Billion Buyback as Profits Soar on Oil Rally
(Bloomberg) -- Exxon Mobil Corp. posted its biggest profit in seven years and pledged to spend as much as $10 billion on share buybacks amid a worldwide rally in commodity prices.
Surging natural gas prices and a rebound in refining margins added to already strong oil and petrochemical prices. Exxon earned $1.58 a share during the third quarter, it said in a statement, compared with the $1.56 average estimate among analysts in a Bloomberg survey. Net income, excluding some one-time gains and losses, reached $6.8 billion, the most since 2014.
Exxon raised dividends earlier this week in a demonstration of its re-emerging financial strength after borrowing heavily to sustain payouts and drilling during the pandemic-drive oil-market collapse.
While high commodity prices combined with steep budget cuts to supercharge cash flow in the quarter, bigger questions still loom over Exxon’s fossil fuel-focused strategy, especially after losing an activist-shareholder battle with Engine No. 1 earlier this year.
Exxon is expected to use the bulk of its extra cash to cover dividends and pay down debt, which peaked on a net basis at almost $70 billion at the end of 2020. All four of the company’s major rivals Chevron Corp., TotalEnergies SE, Royal Dutch Shell Plc and BP Plc are using this year’s commodity rally to also buy back shares, through the latter two were forced to cut their dividends last year, unlike Exxon.
Earlier Friday, Chevron reported record third-quarter cash flow and surpassed all Wall Street profit forecasts on the strength of soaring gas and oil-refining returns. Chief Financial Officer Pierre Breber said in an interview that the supermajor is weighing more share buybacks as a result of the windfall.
Exxon Chief Executive Officer Darren Woods is likely to update to the oil giant’s strategy next month after discussions with new directors. A greater focus on the company’s carbon footprint and new emissions targets are expected but more contentious would be how it plans to invest in the future.
The perils of the energy transition for Big Oil executives were underscored this week when activist hedge fund manager Daniel Loeb pushed for a breakup of Shell. The Anglo-Dutch major, which has rejected Loeb’s demands, posted record cash flow on Thursday but disappointed investors when earnings fell well short of expectations.
Woods introduced an aggressive plan to grow fossil fuel production in 2018 that he was forced to abandon during the pandemic. With cash rolling in once again and commodity markets squeezed for supplies, it would seem opportune to restart the investment plan, but shareholders made it clear earlier this year that they want Exxon to refocus long-term plans and accelerate the energy transition.
Woods will host a conference call with analysts at 9:30 a.m. ET and will be joined by new Chief Financial Officer Kathryn Mikells.
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