Yahoo Finanza Exxon Mobil Posts Record Loss in Wild 2020 as COVID-19 Pandemic Hurts Demand
Exxon Mobil, an American multinational oil and gas corporation, ended 2020 in a bad shape as the energy company reported a record annual loss in the wild year due to the COVID-19 pandemic-driven-slowdown that hurt energy prices and demand.
Irving, Texas-based multinational oil and gas corporation said its fourth-quarter loss was $20.1 billion included unfavourable identified items of $20.2 billion, primarily non-cash impairments; earnings excluding identified items were $110 million, or $0.03 per share assuming dilution. That was a little better than the Wall Street consensus estimate of $0.01 per share.
Last year, ExxonMobil reduced annual cash operating expenses by $8 billion, of which $3 billion are structural reductions. The Company expects to generate additional annual savings of $3 billion by 2023, resulting in total structural annual expense reductions of $6 billion, including savings from a global workforce reduction.
“Exxon Mobil (XOM) guided to the low end of the capex range for 2021 but demonstrated at $50 Brent it could spend at the high end of its budget in 2021 and 2025. While positive on the surface, this could suggest XOM is unlikely to further reduce capex in outer years below its current budget. CCS could be a risk mitigation venture at a minimum and a commercial opportunity at best. Maintain Market Perform,” said Jason Gabelman, equity analyst at Cowen and company.
Exxon Mobil shares, which plunged over 40% in 2020, closed 1.58% higher at $45.63 on Tuesday.
Exxon Mobil Stock Price Forecast
Fifteen analysts who offered stock ratings for Exxon Mobil in the last three months forecast the average price in 12 months at $51.42 with a high forecast of $74.00 and a low forecast of $39.00.
The average price target represents a 12.69% increase from the last price of $45.63. From those 15 analysts, six rated “Buy”, six rated “Hold”, and three rated “Sell”, according to Tipranks.
Morgan Stanley gave a base target price of $57 with a high of $84 under a bull scenario and $22 under the worst-case scenario. The firm currently has an “Overweight” rating on the oil and gas company’s stock.
“Lower ’21 spending, further capital plan flexibility, and incremental cost cuts increase FCF and dividend cover, supporting yield compression. A more proactive approach to low-carbon investments helps mitigate energy transition risks, while also offering new attractive growth options. Reiterate Overweight,” said Devin McDermott, equity and commodity analyst at Morgan Stanley.
Several other analysts have also recently commented on the stock. UBS raised the price target to $48 from $45. HSBC upped the price objective to $52.5 from $49. JP Morgan upgraded Exxon Mobil from a “neutral” rating to an “overweight” rating and raised their price objective to $56 from $50. Cowen and company increased the stock price forecast to $48 from $36.
In addition, Jefferies gave an underperform rating and price target of $39. Credit Suisse Group restated a “neutral” rating and issued a $52 price objective. Zacks Investment Research downgraded to a “hold” rating from a “strong-buy” and set a $51 target price.
Analyst Comments
“Improving FCF outlook and dividend sustainability. With a more constructive commodity price outlook, lower capital spending, and potential for additional cash operating cost savings, the dividend is covered in 2021 and averages 100% over the next 5-years on our estimates. Improving dividend sustainability supports yield compression for Exxon Mobil (XOM) relative to CVX,” Morgan Stanley’s McDermott added.
“Cost cuts defend the dividend. XOM reduced 2022-25 spending plans to $20-25 billion from $30-35 billion, improving dividend sustainability while limiting further pull on the balance sheet. Additionally, XOM is targeting a 15% reduction in cash operating costs, a level we expect it to exceed.”
Upside and Downside Risks
Risks to Upside: 1) Higher commodity prices, including liquefied natural gas (LNG). 2) Successful execution of major capital projects. 3) Permian well performance improvements. 4) Additional cost cuts -highlighted by Morgan Stanley.
Risks to Downside: 1) Lower commodity prices. 2) Cost overruns on major capital projects. 3) Service cost inflation in the Permian erodes returns. 4) Geopolitical risk could impact production volumes and/or returns; Guyana is a particular focus now.
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This article was originally posted on FX Empire
