Exxon Mobil's Q2 results expected to sag, spotlighting need for asset sales

By Jennifer Hiller
HOUSTON, July 30 (Reuters) - Exxon Mobil Corp's XOM.N plan
to accelerate asset sales, a way of delivering needed cash to
finance shareholder returns and major projects, is getting off
to a slow start as oil companies pull back on big deals.
On Friday, the largest U.S. oil company is expected to
report a 79-cents-a-share profit, down from 92 cents a year
earlier, according to data provider Refinitiv. With little cash
from asset sales and a third straight quarter of weaker
year-over-year earnings, Exxon cannot resume share buybacks
sought by investors this year, said analysts.
Chief Executive Darren Woods this year set a target of
raising $15 billion by trimming its portfolio through 2021,
above the average $3.3 billion a year rate between 2017 and
2013. The sales could include more oil-producing properties,
compared with prior deals mostly in refining and marketing, he
said.
But those goals are proving difficult. In its first quarter,
proceeds from sales were just $107 million, the lowest in at
least 11 quarters, and analysts expect the second quarter to
come in at a similar level. Exxon last quarter agreed to sell a
U.S. Gulf of Mexico property for $200 million. "There's not enough cash flow for buybacks, which is what
people want to see," said Jennifer Rowland, analyst at Edward
Jones, who has a "hold" rating on Exxon. Exxon may have to use
debt to help fund its shareholder dividend, she said.

A package of offshore Gulf of Mexico oilfields that Exxon
put on the market last autumn has languished, said analysts.
More recently, the company has begun to market offshore
properties in Nigeria and Norway, according to analysts and
people familiar with the matter. Any one could raise several
billion dollars in a sale, the people said.
Stephen Greenlee, who oversees divestitures as president of
Exxon's Upstream Business Development group, was not available
to address the asset sales, an Exxon spokesman said.
Exxon shares are rated a "buy" by just 23% of analysts,
below BP PLC's BP.L at 71%, Chevron Corp's CVX.N 74%, Royal
Dutch Shell's RDSa.L 80% and Total SA's TOTF.PA 89%,
according to Refinitiv.
"The market is not ready to pay what Exxon thinks these
assets are worth," William Turner, a vice president at
researcher Welligence, said of the offshore U.S. properties. "A
lot of the recent transactions in the Gulf of Mexico have been
going at discounted valuations."
Exxon's pitches are not the only going unanswered, said a
U.S. merger and acquisition advisor who requested anonymity
speaking about M&A matters. "There has been less activity. I'm
not sure if it is the bid/ask or something else; but they just
aren't there," the person said.
There is no doubt Exxon's cash could use a boost. Analysts
slashed earnings forecasts to 79 cents a share from 97 cents
after the company disclosed operating unit expectations this
month.
"We expect another large funding gap this quarter,” wrote
Cowen COWN.O analyst Jason Gabelman, who estimated Exxon's
organic free cash flow this quarter will not cover the $3.7
billion needed for dividends.
The two areas expected to show improved margins during the
period, crude sales and refining, were offset by weaker natural
gas prices and higher maintenance costs. The result was "another
disappointing quarter," wrote Biraj Borkhataria, analyst at RBC
Capital Markets, in a client note.
Exxon has been investing to boost production in the Permian
Basin, the top U.S. shale field, and in offshore Guyana. Exxon
"is always countercyclical" and "has to be viewed in the long
term," said John Groton, director of equity research at Thrivent
Asset Management, which holds Exxon shares. Exxon's shares are
up less than 1% over the last 10 years.

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GRAPHIC-Exxon's haul from asset sales shrinks https://tmsnrt.rs/2ylphfA
GRAPHIC-Exxon's haul from asset sales shrinks interactive https://tmsnrt.rs/2ynmsKU
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