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ExxonMobil (XOM) to Divest Bakken Shale Assets to Reduce Debt
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Exxon Mobil Corporation (XOM - Free Report) is looking to divest its Bakken shale assets in North Dakota as part of the plans to reduce expenses amid the surging oil prices, per a report by Bloomberg. The move came as the company received acquisition interest from undisclosed entities.
In 2021, ExxonMobil generated cash proceeds of $3 billion through asset divestments. XOM is expected to receive $5 billion by divesting the Bakken assets. The company is in the final stage of discussions with bankers to help initiate the sale process. Notably, the final decision has not yet been reached on pursuing a sale.
Asset divestments are crucial components in ExxonMobil’s strategy to optimize cash management. In 2018, the company established a goal to raise $15 billion from asset divestments, and put various U.S. and international assets on the market.
The company has been on a major cost-cutting drive after suffering a historic $22.4 billion loss in 2020. By 2023, it expects to reduce annual costs by $9 billion in an attempt to quickly pay down debt. The company also plans to double earnings by 2027 from the 2019 reported levels.
ExxonMobil’s reshaping of finances is starting to accelerate. The company has initiated share repurchases at the beginning of the March-end quarter of this year. The buybacks are associated with the earlier plan of repurchasing up to $10 billion over the next 12-24 months. The proceeds from the Bakken asset divestment are expected to help fund ExxonMobil’s buyback program.
Company Profile & Price Performance
Headquartered in Irving, TX, ExxonMobil is one of the leading integrated energy companies in the world.
Shares of ExxonMobil have outperformed the industry in the past six months. The XOM stock has gained 54.3% compared with the industry’s 40.1% growth.
Image Source: Zacks Investment Research
Zacks Rank & Other Key Picks
ExxonMobil currently sports a Zack Rank #1 (Strong Buy).
Chevron Corporation (CVX - Free Report) is one of the largest publicly traded oil and gas companies in the world, with operations across the globe. CVX recently raised its quarterly dividend by 6% to $1.42 per share (or $5.68 per share annualized) after increasing the same in April. It also revived its stock repurchase program to buy back shares worth $2-$3 billion.
Chevron’s earnings for 2022 are expected to increase 53.9% year over year. As of Dec 31, CVX had $5.6 billion in cash and cash equivalents, and total debt of $31.4 billion, with a debt-to-total capitalization of a modest 18.4%. Chevron also has a high investment grade rating of AA from S&P, which translates into low borrowing rates.
Petrobras (PBR - Free Report) is one of the largest publicly-traded Latin American oil companies, which dominates Brazil’s oil and gas sector. At the end of 2021, Petrobras had cash and cash equivalents of $10,480 million. Free cash flow for 2021 was up 36.7% year over year to $31,466 million.
Petrobras’ earnings for 2022 are expected to grow 55.5% year over year. Petrobras, with a huge debt burden, has laid strong emphasis on its debt reduction in its recent five-year business management plan (2022-2026) to strengthen its credit rating. As the company focuses on regaining its financial footing by selling assets and curtailing debt load, it has lowered the gross debt below its 2022 target of $60 billion in the third quarter of 2021, well ahead of time.
Devon Energy Corporation (DVN - Free Report) is an independent energy company that primarily engages in the exploration, development and production of oil and natural gas. At 2021-end, Devon had proved developed and undeveloped reserves of nearly 1,625 million barrels of oil equivalent (MMBOE), up from the 2020-end level of 752 MMBOE.
Devon’s earnings for 2022 are expected to surge 81.3% year over year. The company’s board approved an increase in the dividend rate to $1, payable to shareholders on Mar 31, 2022. Management approved variable and fixed dividends for shareholders to further enhance the shareholder value. In 2021, Devon returned $1,315 million to shareholders as dividends, which included fixed and variable dividends.
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ExxonMobil (XOM) to Divest Bakken Shale Assets to Reduce Debt
Exxon Mobil Corporation (XOM - Free Report) is looking to divest its Bakken shale assets in North Dakota as part of the plans to reduce expenses amid the surging oil prices, per a report by Bloomberg. The move came as the company received acquisition interest from undisclosed entities.
In 2021, ExxonMobil generated cash proceeds of $3 billion through asset divestments. XOM is expected to receive $5 billion by divesting the Bakken assets. The company is in the final stage of discussions with bankers to help initiate the sale process. Notably, the final decision has not yet been reached on pursuing a sale.
Asset divestments are crucial components in ExxonMobil’s strategy to optimize cash management. In 2018, the company established a goal to raise $15 billion from asset divestments, and put various U.S. and international assets on the market.
The company has been on a major cost-cutting drive after suffering a historic $22.4 billion loss in 2020. By 2023, it expects to reduce annual costs by $9 billion in an attempt to quickly pay down debt. The company also plans to double earnings by 2027 from the 2019 reported levels.
ExxonMobil’s reshaping of finances is starting to accelerate. The company has initiated share repurchases at the beginning of the March-end quarter of this year. The buybacks are associated with the earlier plan of repurchasing up to $10 billion over the next 12-24 months. The proceeds from the Bakken asset divestment are expected to help fund ExxonMobil’s buyback program.
Company Profile & Price Performance
Headquartered in Irving, TX, ExxonMobil is one of the leading integrated energy companies in the world.
Shares of ExxonMobil have outperformed the industry in the past six months. The XOM stock has gained 54.3% compared with the industry’s 40.1% growth.
Image Source: Zacks Investment Research
Zacks Rank & Other Key Picks
ExxonMobil currently sports a Zack Rank #1 (Strong Buy).
Investors interested in the energy sector might also look at the following companies that presently flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron Corporation (CVX - Free Report) is one of the largest publicly traded oil and gas companies in the world, with operations across the globe. CVX recently raised its quarterly dividend by 6% to $1.42 per share (or $5.68 per share annualized) after increasing the same in April. It also revived its stock repurchase program to buy back shares worth $2-$3 billion.
Chevron’s earnings for 2022 are expected to increase 53.9% year over year. As of Dec 31, CVX had $5.6 billion in cash and cash equivalents, and total debt of $31.4 billion, with a debt-to-total capitalization of a modest 18.4%. Chevron also has a high investment grade rating of AA from S&P, which translates into low borrowing rates.
Petrobras (PBR - Free Report) is one of the largest publicly-traded Latin American oil companies, which dominates Brazil’s oil and gas sector. At the end of 2021, Petrobras had cash and cash equivalents of $10,480 million. Free cash flow for 2021 was up 36.7% year over year to $31,466 million.
Petrobras’ earnings for 2022 are expected to grow 55.5% year over year. Petrobras, with a huge debt burden, has laid strong emphasis on its debt reduction in its recent five-year business management plan (2022-2026) to strengthen its credit rating. As the company focuses on regaining its financial footing by selling assets and curtailing debt load, it has lowered the gross debt below its 2022 target of $60 billion in the third quarter of 2021, well ahead of time.
Devon Energy Corporation (DVN - Free Report) is an independent energy company that primarily engages in the exploration, development and production of oil and natural gas. At 2021-end, Devon had proved developed and undeveloped reserves of nearly 1,625 million barrels of oil equivalent (MMBOE), up from the 2020-end level of 752 MMBOE.
Devon’s earnings for 2022 are expected to surge 81.3% year over year. The company’s board approved an increase in the dividend rate to $1, payable to shareholders on Mar 31, 2022. Management approved variable and fixed dividends for shareholders to further enhance the shareholder value. In 2021, Devon returned $1,315 million to shareholders as dividends, which included fixed and variable dividends.