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Q1 Earnings: Chevron, ExxonMobil split over management of ‘huge cash reserves’ –Report

Photo Collage: As You Sow

*The two top United States oil producers differ over how much to hold in reserves and what to do next in view of the ‘huge cash reserves’ recorded first quarter (Q1) 2023, far in excess of what the two energy companies need for their routine operations

Isola Moses | ConsumerConnect

Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N), two largest United States (US) oil giants, are minting cash from booming oil and gas operations, but are splitting over what to do next.

The two international oil companies Friday, April 28, 2023, posted first-quarter (Q1) results that topped Wall Street forecasts as earnings soared.

Exxon’s net hit $11.4billion while Chevron earned $6.6 billion, and with analysts expecting the strong results to continue this year, reports Reuters.

ExxonMobil and Chevron have both paid down debt incurred during the COVID-19 downturn, have nearly pristine balance sheets, and are spending well below their past levels on new exploration and development projects, report noted.

The pair have low, net debt-to-capital ratios of about 4 percent, a fraction of the double-digit ratios of few years ago, and have cut spending on new projects to less than half their income.

What’s next after companies’ cash piles?

The result: huge cash reserves, far in excess of what they need for routine operations.

They also differ over what to do next, with Wall Street pushing for higher share buybacks and dividends, worried that too much cash could signal a spurt of big-dollar acquisitions.

Exxon CEO Darren Woods stated that he is happy to see cash balances rise so the company is well-positioned for a cycle downturn.

Woods said: “The question is obviously when, but that will come, having noted that he “expects to see cash balances higher” in times when the markets are on the top end of the cycle.

According to the CEO, in regard to strong demand for ExxonMobil’s commodities, he did not oppose acquisitions, if a deal can lead to higher returns for the company’s shareholders.

“It’s got to be one where what Exxon Mobil brings to the table actually increases what either company would do independent of one another,” said he.

It was learnt Exxon was sitting $32.6 billion at the end of Q1 2023, while Chevron’s vault held $15.7 billion, about triple what it needs for operating activity.

However, Chevron, which twice bid on rivals, landing Noble Corp. for $4.1 billion during the 2020 downturn, expects to reduce some of its cash, said Finance Chief Pierre Breber.

“We don’t intend to hold $15-plus billion of cash on our balance sheet,” he said, describing too much cash on the books as “economically inefficient for us to hold it, and it is not our cash, it is our shareholders’ cash.”

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