uploads///Cash flows

How Strong Is ExxonMobil’s Liquidity Position?

Maitali Ramkumar - Author
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Nov. 15 2018, Updated 4:50 p.m. ET

Analyzing ExxonMobil’s cash flows

In the first nine months of 2018, ExxonMobil (XOM) generated ~$27.4 billion in cash from operations, a 21% rise over the first nine months of 2017. The company’s cash outflows from investing stood at $10.9 billion, and its cash outflows from financing stood at $14.0 billion in the first nine months of the year.

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ExxonMobil’s cash flow surplus in the first nine months of 2018

In the first nine months of 2018, ExxonMobil spent $13.5 billion on additions to its plants, property, and equipment. Its dividend payments stood at $10.3 billion in the same period. These vital outflows stood at a cumulative $23.8 billion in the period. After spending on these vital outflows, ExxonMobil was left with a surplus of $3.6 billion (the difference between its cash flow from operations of $27.4 billion and its vital cash outflows of $23.8 billion).

Peer Chevron (CVX) also had a cash flow surplus in the first nine months of the year. Royal Dutch Shell’s (RDS.A) cash inflows from operations stood higher than its combined capex and dividend outflows, but BP (BP) had a marginal cash flow shortfall in the period.

Further, ExxonMobil’s divestment proceeds stood at $3.2 billion. Thus, its cash flow surplus and divestment proceeds were used to repay a portion of its debt, and the remaining cash was added to its cash reserves. ExxonMobil’s cash balance rose from $3.2 billion at the beginning of the first nine months of 2018 to $5.7 billion at the end of the same period.

What does ExxonMobil’s cash flow analysis reveal?

ExxonMobil clocked a cash flow surplus in the first nine months of 2018—a favorable scenario. Its surplus rose year-over-year in the period. The company also used its surplus cash to repay some portion of its debt, strengthening its financials. Despite its debt repayment, ExxonMobil’s cash reserves rose, implying its strengthening liquidity position.

Given the relatively low debt on its balance sheet and its comfortable liquidity position, ExxonMobil has the financial strength to face the volatile oil price environment.

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