Exxon posts best results since 2017, commits to resume share buybacks

Oct. 29 (Reuters) – Exxon Mobil Corp (XOM.N) on Friday pledged to relaunch its long-dormant share buyback program next year, supported by higher earnings and improved cash flow in the third quarter, the surge in global economic activity that triggered demand for fossil fuels exploded.

The profit surge follows several years of poor returns and steep cost cuts for Exxon, and as restless shareholders voted this year to appoint three new directors to the company’s board over their dissatisfaction vis-à-vis its management.

Exxon’s announcement that he will resume share buybacks brings him back to the strategy he pursued for more than a decade, as he was once the largest repurchaser of US companies before suspending this. practice in 2016.

The country’s largest oil and gas company reported third quarter net profit of $ 6.75 billion, or $ 1.57 per share, the highest since the last quarter of 2017. That compared to a loss of $ 680 million, or 15 cents per share, in the one year period earlier.

Exxon’s adjusted earnings of $ 1.58 per share were two cents above Refinitiv’s estimate, with results supported by oil and gas prices more than doubling in the past year.

Third quarter results reflected the highest refining profit in at least two years, soaring natural gas prices and energy shortages that pushed oil to a three-year high. Crude prices continued to climb to near their highest level in seven years.

Exxon shares rose 0.8% to $ 64.83 in the early afternoon.

All three of the company’s businesses have delivered higher returns through past cost-cutting restructurings and as the global economy emerges from the coronavirus pandemic, CEO Darren Woods said.

The benefits of these changes “are showing,” Woods told analysts on a conference call, adding that Exxon expects to “generate the same growth in earnings and cash flow as our pre-pandemic plans” for. an annual profit of $ 30 billion by 2025.

Its cash flow outlook will allow the company to resume share buybacks starting next year as part of a plan to spend up to $ 10 billion on buybacks through 2023, said Exxon.

“The macro winds are in the backs of Exxon, with high upstream prices, strong downstream demand, and chemical margins which, while no longer peaking, remain quite strong,” said Stewart Glickman. , energy equity analyst at CFRA Research.

REDUCTION OF CARBON EMISSIONS

In 2016, Exxon scaled back its share buybacks amid weak results, saying it would buy back shares only to offset dilution in executive compensation plans rather than returning money to shareholders.

In the previous decade, Exxon spent $ 210 billion to buy back its own shares, more than any other American company during this period.

A day after Exxon’s Woods appeared before Congress to respond to the company’s previous rejection of global warming, Exxon said it planned to spend $ 15 billion to reduce its carbon emissions between 2022 and 2027.

Oil and gas profits soared in the third quarter on strong international demand, reaching nearly $ 4 billion from a loss of $ 383 million a year ago. Chemicals profits slipped from last quarter’s peak, but more than tripled from the same period last year.

The company said it would benefit in the fourth quarter from increased oil and gas volumes, increased seasonal demand for gas in Europe and the $ 1 billion sale of its UK assets at sea. North.

Exxon shares have risen more than 50% this year, as profits rebounded from last year’s historic loss, but remain below where they were trading at the start of 2020. This year’s profit helped the company pay off around $ 11 billion in debt incurred last year to cover its dividend.

Earlier this year, Exxon spent heavily in a proxy battle waged by a small hedge fund unhappy with the oil and gas company’s strategy. The fund, Engine No. 1, succeeded in convincing enough shareholders to vote for three new directors to sit on the board of Exxon.

“The results show the company’s renewed confidence in its business by being able to spend much more next year, spend more on low-carbon solutions while increasing the dividend and starting to buy back shares. “said Anish Kapadia, director of energy at Palissy Advisors.

Reporting by Arathy S Nair in Bengaluru; Editing by Shounak Dasgupta, Steve Orlofsky and Paul Simao

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