Exxon/Chevron: time to talk about that cash pile


Energy costs could have come down from their 2022 highs. But Big Oil remains to be making money hand over fist. Investors would possibly ask what they plan to do with all that cash.

In the US, ExxonMobil and Chevron collectively made greater than $18bn in internet revenue throughout the first quarter. Though down from $19.1bn pocketed by the pair within the last quarter of final 12 months, the sum nonetheless represents a unprecedented 53 per cent enhance from the 12 months in the past interval. For Exxon, it was its most worthwhile begin to the 12 months ever.

Both Exxon and Chevron used their windfalls to lavishly reward shareholders final 12 months and pay down debt. That ought to proceed this 12 months. But with underlying cash flows nonetheless properly above historic norms and internet debt down sharply, they might need to assume about extra adventurous makes use of for his or her cash.

Exxon, greater than every other supermajor, can afford to buy groceries. It generated $16.3bn in working cash stream throughout the quarter. Even after $5.8bn of capital expenditures and $8.1bn of shareholder returns, it grew its cash steadiness by $3bn quarter-over-quarter to $32.7bn. At this charge, it may finish the 12 months with almost $42bn of cash and cash equivalents. On prime of that, the stock, at a report excessive of over $119, offers further firepower in any deal negotiations.

Adding scale to its US onshore Permian Basin manufacturing could be the plain transfer. Pioneer Natural Resources, a prime 4 producer there, could be a giant prize. Exxon can be in that prime tier, with Chevron and ConocoPhillips. A mix with Pioneer would possibly appeal to antitrust scrutiny given their sturdy positions in that shale area.

But different Permian offers together with by ConocoPhillips haven’t. Pioneer trades about 1 / 4 lower than Exxon on a 2024 worth to ahead earnings of 9 occasions, suggesting that a cash or shares deal nonetheless appears to be like engaging.

Exxon predictably has deflected any questions on acquisitions, saying any deal has to convey worth. But given its cash gusher, anticipate deal chatter to proceed.

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