15 May

Did ExxonMobil’s Debt Position Strengthen in Q1 2018?

WRITTEN BY Michelle Rey FEATURED IN Company News, Insights, & Analysis

ExxonMobil’s debt compared to peers

ExxonMobil’s (XOM) net debt-to-adjusted EBITDA stood at 1.1x in the first quarter, below the peer average of 1.6x. The peer average considers 13 integrated energy companies globally.

Did ExxonMobil’s Debt Position Strengthen in Q1 2018?

In the first quarter, XOM’s total debt-to-capital ratio stood at 17.0%, which was below the peer average of 36.0%. The ratio shows a firm’s debt as a percentage of its total capital—a snapshot of its capital structure. 

Chevron’s (CVX) total debt-to-capital ratio stood at 21.0% in the first quarter. Royal Dutch Shell (RDS.A) and BP’s (BP) ratios were 33.0% and 38.0%, respectively, in the first quarter.

ExxonMobil’s net-debt-to-adjusted EBITDA

ExxonMobil’s (XOM) net-debt-to-adjusted EBITDA ratio fell from 1.5x in the first quarter of 2017 to 1.1x in the first quarter this year.

In the first quarter, XOM’s net debt has declined 6.0% year-over-year to $36.5 billion. This is due to a steeper decline in total debt compared to cash and equivalents during the period. Total debt fell $3.0 billion over the first quarter of 2017 to $40.6 billion year-over-year, whereas cash and equivalents have declined by $0.8 billion to $4.1 billion year-over-year.

From the first quarter of 2017 to the first quarter this year, the trailing-12-month adjusted EBITDA has risen. Thus, the fall in net debt coupled with the rise in EBITDA led to a decline in the net debt-to-EBITDA ratio year-over-year.

What does ExxonMobil’s debt analysis imply?

ExxonMobil has witnessed a decline in its debt level in the first quarter. This is a good sign, hinting at the management’s intentions to keep its debt under check. ExxonMobil’s debt-related ratios stand below the peer average, which is a favorable scenario. 

ExxonMobil’s total-debt-to-total-capital ratio is the lowest in the industry. Plus, soaring oil prices could lead to further improvement in XOM’s earnings, cash flows, and eventually its debt level. This could lead to further strengthening of its financials.

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