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Exxon keeps buy-backs on the agenda in spite of oil falls

Financial Times

By Ed Crooks in London

Published: May 1 2009 03:00 | Last updated: May 1 2009 03:00

ExxonMobil, the world’s biggest oil company by market capitalisation, has set itself apart from its US and international rivals by continuing with a multibillion-dollar share buy-back programme.

In the first quarter of 2009, the company bought back $7bn worth of shares to reduce the number in issue, and paid out almost $2bn in dividends, running down its cash pile by about $6bn.

However, it said its financial strength meant it was “not constrained” in its ability to take advantage of investment opportunities.

Exxon gave details of its buy-backs as it reported a 58 per cent drop in profits for the quarter, following similar declines by the Europeans BP and Royal Dutch Shell, as a result of the plunge in oil prices.

BP, Shell and Chevron, the second largest US oil company, have all largely discontinued share buyback programmes put in place at a time crude prices were soaring.

Exxon has also distinguished itself with strong growth in dividends. The first quarter dividend of $0.40 per share was 14 per cent higher than for the equivalent period of 2008, and the second quarter dividend of $0.42, announced on Wednesday, was 5 per cent higher over the year.

Chevron, which reports first quarter results today, kept its second quarter dividend at last year’s level.

Ken Cohen, Exxon’s vice-president of public affairs, said the volatility in the oil price, which had led many companies in the industry to defer investment plans and cut jobs, were the “supreme test of a company’s business model”, but Exxon’s strategy “remains unaltered”.

Net profit was $4.55bn, down from a record $10.89bn in the equivalent period of 2008, with falling oil prices responsible for the bulk of the decline.

In spite of that decline, Mr Cohen said Exxon was sticking to its planned capital spending programme of $29bn this year.

Cash flow from operations was $9bn in the quarter, which fell well short of the total of $9bn of distributions to shareholders and $5.8bn of capital spending. As a result, Exxon’s gross cash position shrank from $31bn at the end of 2008 to $25bn at the end of the first quarter. Debt stood at about $9bn.

The company plans a further $5bn worth of buy-backs in the second quarter.

Nevertheless, Mr Cohen said Exxon was “still well-positioned to take advantage of any opportunities that would present themselves in the market place”.

Unlike BP, which on Tuesday reported a sharp fall in costs, Exxon said costs in exploration and production rose $300m compared with the first quarter of 2008.

David Rosenthal, vicepresident of investor relations, said that also reflected the company’s stability.

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