By Jennifer Hiller
HOUSTON, July 30 (Reuters) - Exxon Mobil Corp's planto accelerate asset sales, a way of delivering needed cash tofinance shareholder returns and major projects, is getting offto a slow start as oil companies pull back on big deals.
On Friday, the largest U.S. oil company is expected toreport a 79-cents-a-share profit, down from 92 cents a yearearlier, according to data provider Refinitiv. With little cashfrom asset sales and a third straight quarter of weakeryear-over-year earnings, Exxon cannot resume share buybackssought by investors this year, said analysts.
Chief Executive Darren Woods this year set a target ofraising $15 billion by trimming its portfolio through 2021,above the average $3.3 billion a year rate between 2017 and2013. The sales could include more oil-producing properties,compared with prior deals mostly in refining and marketing, hesaid.
But those goals are proving difficult. In its first quarter,proceeds from sales were just $107 million, the lowest in atleast 11 quarters, and analysts expect the second quarter tocome in at a similar level. Exxon last quarter agreed to sell aU.S. Gulf of Mexico property for $200 million.
"There’s not enough cash flow for buybacks, which is whatpeople want to see," said Jennifer Rowland, analyst at EdwardJones, who has a "hold" rating on Exxon. Exxon may have to usedebt to help fund its shareholder dividend, she said.
A package of offshore Gulf of Mexico oilfields that Exxonput on the market last autumn has languished, said analysts.More recently, the company has begun to market offshoreproperties in Nigeria and Norway, according to analysts andpeople familiar with the matter. Any one could raise severalbillion dollars in a sale, the people said.
Stephen Greenlee, who oversees divestitures as president ofExxon's Upstream Business Development group, was not availableto address the asset sales, an Exxon spokesman said.
Exxon shares are rated a "buy" by just 23% of analysts,below BP PLC's at 71%, Chevron Corp's 74%, RoyalDutch Shell's 80% and Total SA's 89%,according to Refinitiv.
"The market is not ready to pay what Exxon thinks theseassets are worth," William Turner, a vice president atresearcher Welligence, said of the offshore U.S. properties. "Alot of the recent transactions in the Gulf of Mexico have beengoing at discounted valuations."
Exxon's pitches are not the only going unanswered, said aU.S. merger and acquisition advisor who requested anonymityspeaking about M&A matters. "There has been less activity. I'mnot sure if it is the bid/ask or something else; but they justaren't there," the person said.
There is no doubt Exxon's cash could use a boost. Analystsslashed earnings forecasts to 79 cents a share from 97 centsafter the company disclosed operating unit expectations thismonth.
"We expect another large funding gap this quarter,” wroteCowen analyst Jason Gabelman, who estimated Exxon'sorganic free cash flow this quarter will not cover the $3.7billion needed for dividends.
The two areas expected to show improved margins during theperiod, crude sales and refining, were offset by weaker naturalgas prices and higher maintenance costs. The result was "anotherdisappointing quarter," wrote Biraj Borkhataria, analyst at RBCCapital Markets, in a client note.
Exxon has been investing to boost production in the PermianBasin, the top U.S. shale field, and in offshore Guyana. Exxon"is always countercyclical" and "has to be viewed in the longterm," said John Groton, director of equity research at ThriventAsset Management, which holds Exxon shares. Exxon's shares areup less than 1% over the last 10 years.
(Reporting by Jennifer Hiller in Houston and Sinead Carew inNew York; editing by Gary McWilliams and Marguerita Choy)
BP (BP.)
