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Exxon Mobil Corp. has announced an increase in dividends that surpassed expectations, while also reporting an unexpected surge in cash flow, benefiting from rising crude oil prices and favorable US oil-refining margins.
Exxon Mobil has raised its quarterly dividend to 95 cents per share, payable on December 11, exceeding the Bloomberg Dividend Forecast by one cent. In the third quarter, free cash flow more than doubled compared to the previous period, reaching $11.7 billion, significantly surpassing the average estimate of $9.36 billion.
Although this dividend and cash flow news was well-received, the quarter did witness an adjusted per-share profit that fell short by 9 cents, partially due to weak chemical earnings and unsettled hedging instruments. This announcement comes shortly after Chief Executive Officer Darren Woods successfully secured a $60 billion all-stock deal to acquire Pioneer Natural Resources Co., a shale industry giant.
Exxon has been capitalizing on the post-pandemic increase in oil, natural gas, and fuel prices, enjoying robust growth momentum among the major players in the oil industry. The company’s market capitalization has expanded by $160 billion over the past two years, surpassing the entire valuation of BP Plc. This provided Woods with the resources required to acquire Pioneer in what is shaping up to be the largest acquisition of 2023 worldwide.
Elevated crude prices and refining margins, bolstered by the heightened summer demand for gasoline, have enabled Exxon to reverse three consecutive quarters of declining profits. However, a decrease in petrochemical margins, associated with a surge in new supplies from China, had a mitigating effect on the overall results.
Kathy Mikells, Chief Financial Officer of Exxon, highlighted that the company’s investments in fossil fuel projects during the pandemic, when others were retreating, have started to yield results. This progress enables Exxon to repurchase shares more consistently, although she refrained from commenting on the potential for further buybacks.
The landmark deal with Pioneer will propel Exxon to the forefront of Permian Basin output, affording it an unparalleled ability to adjust production to match oil demand during the ongoing energy transition. This strategic move was swiftly followed by Chevron Corp.’s $53 billion agreement to purchase Hess Corp., which will secure Chevron a 30% stake in Exxon’s rapidly expanding Guyana operation.
These two acquisitions underscore the determination of US oil majors to leverage their advantages over European supermajors and American independents by securing control of extensive resources that can sustain crude output for decades to come.
Kathy Mikells expressed that the feedback from investors regarding the Pioneer deal has been “overwhelmingly positive.” She noted that “they completely understand the strategic fit and the strong synergies that we expect to be able to achieve from the transaction.”
