Exxon downsizes global empire as Street worries about dividend
Ill-timed bets on rising demand have Exxon Mobil Corp facing a shortfall of about $48 billion through 2021, according to a Reuters tally and Wall Street estimates, a situation that will require the top US oil company to make deep cuts to its staff and projects.
Wall Street investors are even starting to worry about the once-sacrosanct dividend at Exxon, which in the 20th Century became the world’s most valuable company using global scale, relentless expansion and strict financial controls.
Exxon’s ability to finance that global expansion is no longer assured. This year the company borrowed $23 billion to pay its bills, nearly doubling its outstanding debt. In July, it posted its first backto-back quarterly losses ever. It faces a full-year $1.86 billion loss, according to Refinitiv, excluding asset sales or write downs. The looming shortfall of about $48 billion through 2021 was calculated using cash from operations, commitments to shareholder payouts and costs for the massive expansion program Exxon had planned. Now the company is embarking on a worldwide review of where it can cut expenses, and analysts believe the once unthinkable dividend cut has grown more likely.
Job reviews, benefits cuts
This year's sharp drop in oil demand and pricing has shredded Woods' plan to spend at least $30 billion a year through 2025 to revive production and earnings by expanding in oil processing, chemicals and production, and by taking a commanding role in
US shale and liquefied natural gas, markets that then looked promising. Instead, he must prepare Exxon to operate in a world of weaker demand for its oil, gas and plastics. "We remain committed to our capital allocation priorities — investing in industry advantaged projects, paying a reliable and growing dividend, and maintaining a strong balance sheet," said spokesman Casey Norton.
Debt nearly doubles
Exxon's cash from operations - estimated to be about $17.4 billion this year — is $20 billion below the funds needed for this year's already pared investment plan and shareholder dividend.
Exxon must cut its dividend if the share price remains depressed, Stoeckle said.
Spending cuts and deferrals
Exxon will slash spending in the Permian Basin shale field this year to about $3 billion from an original $7.4 billion budget, consultancy Rystad Energy estimates. The company has said it plans to reduce the number of drilling rigs there to 15 or fewer, from 55 early this year, senior vice president Neil Chapman said in a July call.
No urgency for LNG
Some project schedules are being quietly stretched to save costs. Construction at a $10 billion-plus LNG facility in Texas was moving slowly and now "there isn't the urgency," said Alex Munton, with consulting and data firm Wood Mackenzie.