Is ExxonMobil Accumulating a Cash Flow Surplus?


Mar. 14 2018, Updated 7:33 a.m. ET

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.

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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

ExxonMobil’s cash flow surplus, when measured as a percentage of cash from operations, was 6% in 2017. In comparison, Royal Dutch Shell (RDS.A) had a higher cash flow surplus of 11% in 2017. But Chevron (CVX) and BP (BP) had cash flow deficits of 5% and 22%, respectively, in 2017.

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.


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