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Power costs might have come down from their 2022 highs. However Huge Oil continues to be earning profits hand over fist. Traders would possibly ask what they plan to do with all that money.
Within the US, ExxonMobil and Chevron collectively made greater than $18bn in internet earnings in the course of the first quarter. Although down from $19.1bn pocketed by the pair within the remaining quarter of final yr, the sum nonetheless represents a unprecedented 53 per cent enhance from the yr in the past interval. For Exxon, it was its most worthwhile begin to the yr ever.
Each Exxon and Chevron used their windfalls to lavishly reward shareholders final yr and pay down debt. That ought to proceed this yr. However with underlying money flows nonetheless nicely above historic norms and internet debt down sharply, they could wish to take into consideration extra adventurous makes use of for his or her money.
Exxon, greater than every other supermajor, can afford to buy groceries. It generated $16.3bn in working money circulate in the course of the quarter. Even after $5.8bn of capital expenditures and $8.1bn of shareholder returns, it grew its money steadiness by $3bn quarter-over-quarter to $32.7bn. At this price, it might finish the yr with almost $42bn of money and money equivalents. On high of that, the inventory, at a document excessive of over $119, supplies further firepower in any deal negotiations.
Including scale to its US onshore Permian Basin manufacturing can be the plain transfer. Pioneer Pure Assets, a high 4 producer there, can be a giant prize. Exxon can be in that high tier, with Chevron and ConocoPhillips. A mixture with Pioneer would possibly appeal to antitrust scrutiny given their robust positions in that shale area.
However different Permian offers together with by ConocoPhillips haven’t. Pioneer trades a couple of quarter lower than Exxon on a 2024 worth to ahead earnings of 9 occasions, suggesting {that a} money or shares deal nonetheless appears enticing.
Exxon predictably has deflected any questions on acquisitions, saying any deal has to convey worth. However given its money gusher, anticipate deal chatter to proceed.
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