Exxon Mobil

Oil & Gas

ExxonMobil planned to funnel as much as $30 billion back to their Wall Street investors in 2022

Exxon’s CFO said the company was on track to spend $15 billion on dividends and $15 billion on stock buybacks in 2022. “Kathy Mikells — Senior Vice President, Chief Financial Officer:We’re in the process of executing a $30 billion — up to $30 billion share repurchase program through 2023. We are on track to get $15 billion of that program done by the end of the year. We did about $10.5 billion in share repurchases through the third quarter. And if you look across the year, that would put us at $15 billion in dividends and about $15 billion in share repurchases. So I’d say both a pretty balanced return to our shareholders. And I think that puts us pretty well ahead of peers in terms of returning excess cash to shareholders. So we are mindful of our cash balance. We ended the quarter at about $30 billion. It is possible that our cash balance is going to float up a little bit from there depending on what the market environment continues to look like.” (ExxonMobil Q3 2022 Earnings Call Transcript, 10/28/2022)

ExxonMobil said that it was benefiting from tight refinery capacity and it planning on “capital discipline”

Exxon’s CEO said that refinery capacity was continuing to decline and predicted “we could see tight markets for some time to come.” “Darren Woods — Chairman and Chief Executive Officer:And so if you look at where we are investing in refining it, it’s for sites that have integrated chemicals, lubricants and fast-growing clean fuels business. And we think that gives us a structural advantage versus broader industry. This has been and always has been a thin margin business. And so you typically scratch through the thin low periods, which lasts for a very long time and then take advantage of some of the highs. And as a result of that thin margin business, if you look over time, certainly in the West, refining capacity has been on the decline. We actually showed a chart last quarter and again this quarter that shows that drop in refining capacity. If you look at some of the windfall taxes that are being talked about within Europe, that’s going to put additional pressure on refining margins. So there is certainly a scenario out there that says we continue to see under investment refining. We continue to see that capacity coming out of the market. And then depending on the build side of the equation and how much capacity gets built out in the Middle East, we could see tight markets for some time to come. Of course, we don’t plan for that. We plan for thin margins and very tough conditions and then hope for the best.” (ExxonMobil Q3 2022 Earnings Call Transcript, 10/28/2022)

Exxon’s CEO reiterated that capacity and production was restricted but stressed the company was only seeing investments that “high returns at low prices.” “Darren Woods — Chairman and Chief Executive Officer: Yeah, sure. Well, I think the point you make are good ones. The market is tight. And I think generally, the industry — there’s not a lot of capacity as you look across the different steps required to bring on additional production. So I think that is tight. That will, obviously, with time loosen up a little bit. But I think, generally speaking, for the industry is constrained. Obviously, every company will have different degrees of freedom in that space. We have some degrees of freedom there, but I would just say we’re staying very firmly grounded in our philosophy of making sure that the investments that we make generate high returns at low prices.” (ExxonMobil Q3 2022 Earnings Call Transcript, 10/28/2022)

Exxon’s CEO stressed “capital discipline,” saying the company would only invest in production that would be profitable “even in a down cycle.” “Darren Woods — Chairman and Chief Executive Officer: And so the capital discipline — my definition of capital discipline is making sure that you spend money that’s advantaged and has generated good returns even in the down cycle. We’re going to stay grounded in that. And so anything that we do on the margin has to, first and foremost, meet that criteria, that it’s robust to a wide range of price environments, and that we’d be happy irrespective of what prices we’re seeing out the window. We’ve got capacity to do that, frankly, in some space. So we will — on the margin spend money to where we can see an opportunity to bring that on. But I wouldn’t say — if you look at kind of the range of capex that we’ve provided over the years, we gave ourselves that range, obviously, anticipated movement not only within the year, but across from one year to the next. And so we feel pretty good that — in terms of the ranges that we’ve provided.” (ExxonMobil Q3 2022 Earnings Call Transcript, 10/28/2022)

Exxon’s CEO: “I think in the short term, everyone will squeeze what they can.” “Darren Woods — Chairman and Chief Executive Officer: Yeah. Thanks, Roger. I think the industry has been historically pretty good at flexing on capacity to meet the demand. And so I’m optimistic that with time, the market — and we’ve proven this, I think, over the years that the markets will come back into balance, but it is a function of time. I think in the short term, everyone will squeeze what they can. Certainly, you’ve seen us pushing as hard as we can to make sure that we’re running reliably, and we’re getting product to the marketplace to meet that need in the market. I know everyone else is trying to do the same. So I think that piece of it is sweating all the existing assets as hard as you can.” (ExxonMobil Q3 2022 Earnings Call Transcript, 10/28/2022)

Exxon told analysts it expected $30 billion in buybacks in 2022 and 2023

Exxon funneled $7.6 billion to shareholders in buybacks and dividends in the past quarter.“Darren Woods — Chairman of the Board and Chief Executive Officer: Cash flow from operations was $20 billion, further strengthening our balance sheet. Our net debt-to-capital ratio declined to about 13%, while the growth ratio is now at 20%, at the low end of our target range. We returned $7.6 billion to shareholders during the quarter in the form of dividends and share repurchases. The increase in distribution reflects the confidence we have in our strategy, the performance we are seeing across our businesses, and renewed strength of our balance sheet.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon told analysts it expected $30 billion in stock buybacks in 2022 and 2023. “Kathy Mikells — Senior Vice President, Chief Financial Officer: Sure. I’m happy to take that. So look, as you know, our first priority is to continue to invest in the business. And we talked last quarter about the fact that we expect it to build our cash balance to between $20 billion to $30 billion, which gives us both a strong balance sheet and a strong cash balance, which we view as a competitive advantage that provides us flexibility through the cycle. We’re trying to strike the right balance in terms of share repurchases and dividends. As you know, we raised our quarterly dividend by $0.01 in the fourth quarter of 2021. And last quarter, we tripled the size of our share repurchase plan, which is now up to $30 billion of share repurchases this year and next. So we’re definitely focused on being efficient as we look to return capital to shareholders. And obviously, the share repurchase program has a secondary benefit of reducing the nominal size of our dividend. So I’d say we’re trying to strike the right balance. Our board reviews this pretty regularly, and we feel good about where we’re at right now.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon blamed refinery margins on low investment by the oil industry and predicted higher prices for years

Exxon’s CEO blamed low refinery capacity and high margins on the fact “prior to the pandemic, industry investments were below historical levels” ”Darren Woods — Chairman of the Board and Chief Executive Officer: Margins in North America tightened during the quarter as product prices continue to lag the steep increases in ethane feedstock cost, consistent with higher gas prices. Before recapping our financial results, let me touch on the market environment that underpins them. As I mentioned in my prerecorded remarks, large annual investments in oil and gas production are required to offset normal depletion, even more is required to grow net production. Prior to the pandemic, industry investments were below historical levels. The economywide shutdowns during the pandemic exacerbated the problem. We are now experiencing tight markets across most of our businesses as supply lags demand recovery. We clearly see the tightness in supply in refining, where the closure rate during the pandemic was 3x the rate of the 2008 financial crisis. Given the long investment cycle times, growing supply will not happen overnight.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon’s CEO: “we’ve got this gap, demand recovers, and we don’t have the capacity to meet that, which has led to a record, record-high refining margins.”“Darren Woods — Chairman of the Board and Chief Executive Officer: Sure. Happy to do that, Stephen. Thanks for calling in. Yes, you say it’s a volatile area. I think the thing that’s really changed in the refining landscape, which has impacted — we’re seeing that impact across a lot of industries and parts of our business is the pandemic. If you go back since 2020 and as we’ve mentioned in our prepared presentation, 3 million barrels a day of refining capacity has come out of the circuit since the pandemic. And what has typically happened, which is three times the rate of historical levels. And typically, historical levels have been offset by new builds coming in. And of course, a lot of those new builds got pushed out because of the pandemic and the lack of revenue in the extremely negative and poor refining margins. And so, we’ve created this hole with a lot more capacity coming off-line without a whole lot of new capacity, typically out and developing in parts of the world in Asia and the Middle East. That capacity is not coming on. So we’ve got this gap, demand recovers, and we don’t have the capacity to meet that, which has led to a record, record-high refining margins.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon’s CEO said that while new refinery capacity was coming on line, it’s “still fairly short of the capacity that came off. And so, our view is we’re going to see what I say, the tighter supply and demand balance.” “Darren Woods — Chairman of the Board and Chief Executive Officer: And it’s one that takes advantage of the utilities and the units that we already have and the connection that we have with the Permian. So a very advantaged project coming onto the market at a really good time. Outside of that, I don’t see a whole lot of additional expansions here in the U.S. And then, as we mentioned in the presentation, over the next two years, probably 1 million barrels a day of capacity, including the 2 50 at our site coming on in the marketplace, which is still fairly short of the capacity that came off. And so, our view is we’re going to see what I say, the tighter supply and demand balance. One of the real question marks out there is what happens with demand. I would tell you, even at 2019 levels, the market is relatively tight. And so, I expect a tighter market and maybe elevated margins versus what the historical norm is.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon’s CEO predicted, “this will be a few-year price environment.” “Darren Woods — Chairman of the Board and Chief Executive Officer: But I would expect much lower than what we’ve experienced here in the second quarter. And then, with time, we’ll see that capacity come back on out in Asia and the Middle East. And the world market is very efficient, and those barrels will flow to the demand centers and balance things off. And so, I think this will be a few year price environment, and we’ll get back to what I think is a more typical refining industry structure.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon’s CEO told analysts that countries were recognizing renewables were not sufficient and that fossil fuels were part of the energy equation

Exxon’s CEO said of renewables “there’s a recognition that there are deficiencies in those technologies. And while they offer an important solution and are necessary, they’re not sufficient.”“Darren Woods — Chairman of the Board and Chief Executive Officer: You bet, Jason. I think the short answer is yes. It’s incentivizing, I think, both of those. And I think that’s appropriate to look where there’s an opportunity to take advantage of what I’ll call the natural endowments in terms of sun and wind to deploy those technologies and renewable technologies to generate power. But at the same time, I think there’s a recognition that there are deficiencies in those technologies. And while they offer an important solution and are necessary, they’re not sufficient. And so, I think at the same time, a recognition that we need to do more, particularly with gas given its cleaner footprint.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon’s CEO: “the challenge here is emissions. Not oil and gas itself, it’s the combustion of oil and gas and the emissions associated with that.” “Darren Woods — Chairman of the Board and Chief Executive Officer: And I think a recognition as it was just speaking with Sam about, that the challenge here is emissions. Not oil and gas itself, it’s the combustion of oil and gas and the emissions associated with that. And so, dealing with emissions through carbon capture and storage is another opportunity to address the problem at a much lower cost and in a much quicker time frame. And so, my sense and the conversations I’m having with governments around the world is a recognition of this broader approach, a basket of technologies are going to be needed and emphasis should be put on all the ones for the right reasons at the right time and consciously and explicitly recognizing the deficiencies and making sure that we’re mitigating those deficiencies. It was just in Europe and having a conversation with some of the government leaders there and clearly recognize the challenge associated with renewables, wind, and solar and the intermittency issue and recognition that gas and gas-fired power gen will be an important backstop to address that. So I think there’s a much more holistic approach being taken and a more thoughtful one, and I think that’s encouraging.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon’s CEO called emissions the “real challenge with energy transition,” as that “opens up the door for additional oil and gas and the receptiveness of oil and gas coming on the marketplace.” “Darren Woods — Chairman of the Board and Chief Executive Officer: Yes. Well, I think, Roger, it’s a complicated space you’re asking about, but a good one. I do think if, over time, policymakers focus on what I think the real challenge with the energy transition is, which is dealing with emissions and the broader door opens for, say, carbon capture and storage or hydrogen and specifically blue hydrogen that opens up the door for additional oil and gas and the receptiveness of oil and gas coming on the marketplace, which I think frankly, is important just given the costs associated with the transition. If you can find ways to use existing infrastructure and don’t have to rewire your entire industrial processes and power generation systems, that’s going to be a win for society as we bring down emissions.” (ExxonMobile Q2 2022 Earnings Call, 7/29/2022)

Exxon Mobil emphasized the firm’s “capital discipline” 

ExxonMobil’s CEO bragged about their “capital discipline,” saying their breakeven price was now as low as $35 a barrel. “Darren Woods — Chairman of the Board and Chief Executive Officer: We maintained our disciplined approach to investments, focused on the competitively advantaged low-cost of supply opportunities, and on growing our portfolio of high-value products. Capex was $16.6 billion for the year, which was near the low end of our guidance. As a result of our cost reductions, improved efficiency, and capital discipline, we’ve lowered our Brent breakeven price to $41 per barrel. We’re continuing to drive that down, even more, expecting to average $35 a barrel between now and 2027.” (ExxonMobil Q4 2021 Earnings Call, 2/1/2022)

ExxonMobil used high prices to expand share buybacks and dividends

ExxonMobil’s CFO said the of the “continued positive market environment, that would cause us to increase the pace of the share repurchase program.” “Kathy Mikells — Senior Vice President, Chief Financial Officer: Sure. So, look, our capital allocation priorities remain the same, right? First, let’s make sure we’re investing in the high-return assets and products across the business from Guyana to chemical performance products to biofuel. Second, really continuing to strengthen the balance sheet I talked about on the third quarter. And we continue to look out to our term debt maturities with an eye to paying those down in 2022 and continuing to sustain the strong dividend that we have, and then, obviously, returning further available cash to shareholders. We would have started the 10 billion share repurchase program at the beginning of the year, what I would have described as an equal pay against the 24-month, you know, longer-term time frame. As we assess both our year-end results, where we ended up in terms of net debt looking at the continued positive market environment, that would cause us to increase the pace of the share repurchase program. You know, and as I stand here today, I’d say increasing the pace with the faster end of that 12- to 24-month pace in mind. We will continue to evaluate the program and the pace throughout the year.” (ExxonMobil Q4 2021 Earnings Call, 2/1/2022)

ExxonMobil’s CEO: “we increased the annual dividend for the 39th consecutive year and announced a $10 billion share repurchase program that started last month.” “Darren Woods — Chairman of the Board and Chief Executive Officer: Cash flow from operating activities increased to $48 billion, the highest since 2012. We used the available cash to restore our balance sheet, essentially paying back what we borrowed in 2020, reducing our debt-to-capital ratio to about 21%. As a result of our restored financial strength, we increased the annual dividend for the 39th consecutive year and announced a $10 billion share repurchase program that started last month. Overall, a strong list of accomplishments.” (ExxonMobil Q4 2021 Earnings Call, 2/1/2022)

Exxon Mobil’s CEO said “refinery rationalization” during the pandemic was leading to huge margins in refining oil. “Darren Woods — Chairman of the Board and Chief Executive Officer: Sure. And good morning, Neil. Yeah, I may — if I can start. And I feel like we’re going to be a little bit of a broken record with respect to the anchoring a lot of what we’re seeing in the market today across our sectors with the pandemic. And you’ll recall, as we were going through that very deep down cycle where demand for fuels products dropped significantly, there was a lot of refinery rationalization. In fact, refineries were shutting down at a much, much higher rate than historical averages, four times, if not higher. And so you had a lot of capacity coming out of the marketplace. There were new facilities that were planned or in progress primarily in the Middle East and out in Asia. Those got deferred and delayed because of the crunch. And so you’ve got, I think, this period of time where you’ve taken a lot of capacity out and new capacity that was planned or in progress has been deferred and delayed. And so we’ve got a period with lower supply. And then, of course, as demand has picked up, that has led to this very tight market and the higher margins that we’re seeing.” (ExxonMobile q1 2022 Earnings Call Transcript, 4/29/2022)