Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Exxon, Chevron Earnings Preview: Improving Cash To Secure Dividends, Cut Debt

By Investing.com (Haris Anwar/Investing.com)Stock MarketsApr 29, 2021 09:29AM ET
www.investing.com/analysis/exxon-chevron-earnings-preview-improving-cash-to-secure-dividends-cut-debt-200576020
Exxon, Chevron Earnings Preview: Improving Cash To Secure Dividends, Cut Debt
By Investing.com (Haris Anwar/Investing.com)   |  Apr 29, 2021 09:29AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The recovery in oil prices over the past year has eased financial pressures on big producers, who suffered one of their worst annual performances in decades during the pandemic. When two of the energy sector's supermajors report Q1 earnings on Friday, Apr. 30, ahead of the open, investors will be focusing on their cash generation, something that's needed to balance their books.

The latest trend in oil markets suggests that energy stocks have passed the worst of the pandemic-driven crisis, as oil demand slowly increases, fuelled by both OPEC+ production cuts and countries reopening after COVID-19 lockdowns.

Yet, the improving demand-supply equation doesn’t mean that the largest U.S. oil producers—ExxonMobil (NYSE:XOM) and Chevron (NYSE:NYSE:CVX)—are out of the woods. The pandemic has loaded their balance sheets with debt as they borrowed to cope with the 2020 crash in oil markets and fund their dividends.

While announcing its fourth-quarter earnings 2020 in January, Exxon reported its first annual loss in at least three decades, taking a $19-billion impairment charge, with cash flows swinging to negative $20 billion after dividend payouts were included.

Chevron, on the other hand, performed better than Exxon, as the California-based energy giant avoided major expansion plans during the past five years as it focused instead on spending controls. In 2020, Chevron paid out more cash in dividends ($9.7 billion) than it spent on capex ($8.9 billion). That hasn’t happened for Chevron in at least 30 years.

With the combination of higher oil prices, tight spending and asset sales, the two biggest North American producers are expected to show higher sales when compared with the previous quarter. Exxon will likely report an 18% jump in revenue for the quarter that ended on Mar. 31 to $55.18 billion, while Chevron should post a 26% surge in sales, according to analysts’ consensus forecasts.

Improving Cash Flows

Despite these improving fundamentals, some analysts believe these giants aren’t in a position to return more cash to their shareholders. The Texas-based Exxon has said it will maintain its $15-billion annual dividend, while paying down debt if oil and gas prices remain at current levels. JPMorgan sees Exxon’s free cash flow rebounding to $19.6 billion this year, giving it a sizable surplus with which to reduce borrowing.

ExxonMobil Weekly Chart.
ExxonMobil Weekly Chart.

Of the five supermajors, Chevron has the best balance sheet and “strong prospects” for a share buyback, according to HSBC analyst Gordon Gray, as stated in a Bloomberg report. The California-based company said in March that it should generate $25 billion of free cash over and above its dividend through 2025 if Brent crude remains at $60.

Chevron Weekly Chart.
Chevron Weekly Chart.

Goldman Sachs, on the other hand, is forecasting the largest jump in oil demand, fuelled by the global economic recovery amid the COVID-19 vaccination rollout.

In a note to clients on Wednesday it said:

“The magnitude of the coming change in the volume of demand—a change which supply cannot match—must not be understated.”

Bottom Line

The major oil procedures in the U.S. have seen the worst of the pandemic-triggered demand collapse. Tomorrow’s earnings release will likely show that their cash generation is improving and they’re in a better position to pay dividends from their own pockets and reduce their debt loads.

Exxon, Chevron Earnings Preview: Improving Cash To Secure Dividends, Cut Debt
 

Related Articles

Exxon, Chevron Earnings Preview: Improving Cash To Secure Dividends, Cut Debt

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Keith Collier
Keith Collier Apr 30, 2021 10:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
ju 9 I 90 9k 909890 9k 009 I 9 po I i7 I 99o[ppo up 7i097 I oil it i
Gp Gwapo FinesSeame Street
Gp Gwapo FinesSeame Street Apr 30, 2021 2:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Happy to be here.
Georgios Markou
Georgios Markou Apr 29, 2021 5:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you Haris great explanation
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email