Exxon Profits Improve But Stock Is Going Down Anyway

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In the first quarter since a spectacular reshuffle of its board of directors,

Exxon Mobil

posted strong results and tried to allay investor concerns about where the company is heading.

Rising prices in the petroleum and chemicals markets improve Exxon’s bottom line (ticker: XOM), while cost reductions implemented by the company pay off with enough cash flow to pay back its debt and increase its dividend with room to spare. Second-quarter revenue was $ 67.7 billion, beating Wall Street estimates by more than $ 3 billion. Its earnings per share of $ 1.10 exceeded expectations by 9 cents.

Still, the title fell 2% at midday. In general, oil companies are getting less credit for improving earnings at this point, given their stocks’ outperformance this year. Exxon stock is up nearly 40% since the start of the year, while the

S&P 500

increased by about 17%.

In fact, Exxon suddenly looks like a lean cash-flow machine, making bigger profits while cutting expenses more dramatically than expected. For the second consecutive quarter, Exxon hedged its dividends and capital expenses from operating cash flow.

The company’s second quarter results showed how much rising oil and chemicals markets are benefiting Exxon, even after the company has significantly reduced its focus over the past year.

Exxon spent just $ 7 billion on capital spending in the first half of the year and plans to invest in the lower end of the $ 16- $ 19 billion range that it asked investors to invest in. wait for the whole year. This should help allay fears that oil companies will start to ramp up spending as oil prices rise, potentially threatening their margins.

The big question when appealing to the company’s investors was the direction of the new board of directors. Exxon held its first in-person board meeting this week, and the people sitting in the room were not the ones management expected to see a year ago.

One analyst called it “the 800 ton gorilla”, which is heavy even by gorilla standards. CEO Darren Woods said in response to questions that the new board appears to be aligned with its goals and investors should not expect drastic changes in the company’s strategy.

Although some of the investors involved in the proxy race that led to the reshuffle described the board changes as a dramatic shift in climate policy, Woods’ rhetoric about Exxon’s strategy has not changed on this point. He is still hesitant for Exxon to invest in areas like solar and wind, for example, and continues to talk about the company’s plans for carbon capture and storage.

Woods said he didn’t expect the company to present any new plans in an “Investor Day Big Bang” announcement. On the contrary, he said, there will be an “ongoing dialogue about where the business is going.” He seemed confident that the new board members agreed with many aspects of the company’s strategy.

Investors can expect to see “more of a continuum in the discussion and evolution of these plans going forward,” Woods said. Many of the company’s core goals, such as how it approaches the energy transition, have not changed, he said.

Write to Avi Salzman at [email protected]