Analyzing ExxonMobil’s cash flows
In 2017, ExxonMobil (XOM) generated $30.1 billion in cash from operations, a whopping 36% rise over 2016. It had cash outflows of $15.4 billion in the form of an addition to plant, property, and equipment, and $13 billion in the form of dividends.
ExxonMobil’s cash flow surplus
Considering the addition to plant, property, and equipment and the dividend payments, XOM’s cumulative cash outflows were $28.4 billion in 2017. That led to a surplus of $1.7 billion (the difference between cash inflows of $30.1 billion and cash outflows of $28.4 billion), which was used to repay some portion of its debt.
Peers’ cash flows
What does ExxonMobil’s cash flow analysis reveal?
ExxonMobil swung from a cash flow deficit in 2016 to a cash flow surplus in 2017, which is a favorable sign.
Going forward, with ExxonMobil’s target to grow its earnings led by a robust upstream and value-maximizing downstream portfolio, the company could see a huge increase in its cash flows. It expects 90% growth in its cash flows by 2025 at an oil price level of 2017. However, if the oil price level rises to an average of $60 per barrel, the company expects its cash flow to increase 105% by 2025. If growth happens as expected, then with controlled capex (capital expenditure) and consistent dividends, XOM could witness a fairly large discretionary cash flow surplus.
In the next part, we’ll look at XOM’s segmental earnings dynamics.