Exxon Bearish On Oil In Private While Dividend Protected At All Costs

GILLIAN RICH
11/25/2020

Exxon Mobil's (XOM) internal forecasts on oil prices reportedly grew bearish recently as the energy giant cuts jobs and capital spending to protect its dividend. Exxon stock fell.


Logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro


In September, Exxon lowered its oil price expectations by 11% to 17% for the next seven years, according to a Wall Street Journal report. It now sees Brent oil prices between $50 and $55 per barrel for the next five years before hitting $60 in 2026 and 2027.

Oil prices have remained in $40-to-$49-per-barrel range as Covid-19 lockdowns hit global demand. U.S. oil prices even went negative in April. On Wednesday, U.S. crude futures were around $45 a barrel with Brent at $48, both hitting their highest levels since early March.

Exxon doesn't publish its oil price expectations but has been positive about the long-term outlook for its business in public. During the Q3 earnings call, Exxon officials said the company wasn't canceling any projects that were in execution or in the funding process.

"We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend," CEO Darren Woods said in the earnings statement.

To keep investors happy, Exxon is maintaining its quarterly dividend at 87 cents a share. But to protect its payout, the company is cutting spending and jobs. Exxon sees 2021 capital program at $16 billion-$19 billion, down from the 2020 target of $23 billion. And it plans to eliminate about 14,000 positions.

Analysts have questioned the sustainability of the Exxon stock dividend as increased borrowing is necessary to support it.

Exxon to cut up to 300 jobs in Canada

Wed, November 25, 2020

(Reuters) - U.S. oil major Exxon Mobil Corp said on Wednesday it plans to reduce up to 300 positions in Canada as part of an ongoing cost-cut plan due to a coronavirus-driven slump in oil prices.

Reductions will include positions at Imperial Oil Ltd, ExxonMobil Canada Ltd and ExxonMobil Business Centre Canada ULC, the company said.

Oil producers, including Exxon, have been slashing costs due to a collapse in oil demand and ill-timed bets on new projects. The top U.S. oil company had earlier outlined more than $10 billion in budget cuts this year.

Suncor Energy, Canada's second biggest oil company, said last month it would cut its workforce by up to 15% over the next year and a half.

Canadian energy companies have also suffered from scarce capital due to chronic pipeline congestion and high emissions.

(Reporting by Shariq Khan in Bengaluru; Editing by Arun Koy