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Earnings Preview: Watch out for capex spending updates from ExxonMobil in Q1

ExxonMobil (XOM) today announced a quarterly dividend of $0.87 per share for the second quarter, which is an increase of 5 cents from the last quarter. It’s worth noting that the oil giant has been consistently raised annual dividend payments for 37 years.

Exxon’s shares have jumped 20% this year backed by solid Q4 results, increasing oil prices in the US and better refining margins, which could bode well in the impending future.

What Street expects?

Exxon is expected to report Q1 earnings of $0.74 per share, down 32% over last year. Revenue is projected to decrease by 5.8% to $64.26 billion from the prior year period. The muted expectations could be attributed to lower oil prices and weak refining and chemical margins which have been impacting the integrated oil and gas players like Exxon and its peers.

Exxon is scheduled to report its first-quarter results tomorrow before the bell, followed by the conference call at 9:30 am ET. Investors would be anxious to know how the oil and gas behemoth is viewing the 2019 macro environment and its plans for the current fiscal period.

For the first quarter, the company expects upstream volumes to be similar to last quarter. Downstream refining margins would be under pressure and chemicals division profits would be dented by improved supply and pricing pressure.

Ambitious Growth Plans

Exxon plans to spend $30 billion this year and has already stated it to increase to $35 billion from 2020. The company is in the process of divesting assets which are bringing in lower profits and plans to ramp up investments in projects across all its three divisions which would improve efficiency and productivity resulting in lower costs and higher profits.

Higher CapEx spending would impact free cash flow in the short-term, however, once the projects resume production, investors can see better top and bottom line numbers which would make it attractive in the long-term.

Q4 Performance

For the Q4 period, revenue improved 8% to $71.9 billion, but earnings saw a 28% dip due to tax reforms and impairments. Production increased 0.5% over last year, and 5.9% from the third quarter, which was a good sign for investors. However, the results surpassed estimates.

ExxonMobil fourth quarter 2018 earnings snapshot
Exxon Mobil Q4 2018 Earnings Infographic

Exxon’s rival Chevron Corporation (CVX) is also scheduled to report its Q1 results tomorrow before the bell. Investors will be interested in knowing from the management about the rationale for acquiring Anadarko Petroleum (APC).

It’s worth noting that Chevron agreed to buy Anadarko for $50 billion. However, Occidental Petroleum (OXY) came up with a counteroffer of $76 per share with the deal valued at $57 billion. It would be interesting to see how Chevron plans to proceed further on the deal tomorrow.

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