ExxonMobil May Need $15B In Debt To Support Dividend, Says MKM Partners

Exxon Mobil Corporation XOM is expected to need approximately $15.6 billion in incremental debt financing over the next years to back its dividend, increasing the oil company's outstanding debt by 22%, according to MKM Partners.

The ExxonMobil Analyst: John Gerdes initiated coverage of Exxon Mobil with a Buy rating and $55 price target.

The ExxonMobil Takeaways: Exxon could lower its capital expenditure to around 3.42 million barrels of oil equivalent per day in 2022, assuming oil prices of $47.50 per barrel in 2021 and $55 per barrel in 2022 and natural gas prices of $3 and $2.80, respectively, Gerdes said in the initiation note.

ExxonMobil could further reduce its capital expenditures to $16-$17 billion annually in the next two years, the analyst said. 

“Given this outlook, the company generates approximately $13.6 billion of aggregate FCF in 2021/2022, and assuming a minimum cash balance of ~$3 billion, which provides ~$0.5 billion of financing entering 2021, implies a need to externally fund ~$15.6 billion of the ~$29.7 billion aggregate dividend payments the next two years.”

XOM Price Action: Exxon shares were trading down 0.97% at $37.60 at last check Thursday.