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3 Energy Companies With Incredibly Strong Balance Sheets
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It is always important for a company to have a stable balance sheet or stockpile cash for future investments and acquisitions. Nobody likes a company to be saddled with debt as the burden of interest expenses can dent its financial flexibility. Overall, a company having a solid balance sheet is part of good fundamentals and deserves a premium.
For a cyclical sector like Oil/Energy, having a good balance sheet is even more important. One thing you don't want to happen is for oil prices to crash with the company being highly levered. As it is, during lean years, the big operators have to borrow to sustain their dividends, while the smaller ones need cash just for survival. This means you want to see low debt levels during those times. On the other hand, when oil and gas prices are high, a rock-solid balance sheet would ensure solid financial footing during lean years.
Below, we discuss three energy companies with a light debt load, healthy balance sheet, and the willingness to distribute its cash to their shareholders. Each of these three companies — Chevron (CVX - Free Report) , ExxonMobil (XOM - Free Report) and Pioneer Natural Resources Company — currently carry a Zacks Rank #3 (Hold).
Chevron: Chevron is one of the largest publicly traded oil and gas companies in the world, with operations that span almost every corner of the globe. The only energy component of the Dow Jones Industrial Average, San Ramon, CA-based Chevron is fully integrated, meaning it participates in every aspect related to energy — from oil production, to refining and marketing.
The company boasts a clean balance sheet, manifested by its fairly low debt-to-equity ratio. As of Mar 31, CVX had $15.7 billion in cash and cash equivalents and total debt of $23.2 billion with a debt-to-total capitalization of a modest 12.6%, well below the Zacks Oil and Gas Integrated International industry average of 24.5%. This is why the supermajor carries a high investment grade rating of AA from S&P, which translates into low borrowing rates.
Chevron is using its balance sheet strength to pay a safe quarterly dividend of $1.51 per share (or $6.04 per share annualized) and run an outsized stock repurchase program of up to $75 billion.
ExxonMobil: Another bellwether in the energy space, ExxoMobil also has a strong balance sheet. XOM’s optimal integrated capital structure that has historically produced industry-leading returns and track of capex discipline across the commodity price cycle make it a relatively lower-risk play in a volatile sector.
ExxonMobil is in excellent financial health. It has AA credit rating, and used its strong balance sheet to invest throughout the pandemic-driven energy market downturn. With $32.7 billion, the company is awash in cash. Moreover, XOM finished the first quarter of 2023 with a total debt of $41.4 billion and a debt-to-total capitalization of just 15.9%.
The company’s fortress-like balance sheet has allowed it to reward shareholders handsomely. ExxonMobil pays a quarterly dividend of 91 cents per share and is on track to buy back up to $17.5 billion during the year.
Pioneer Natural Resources: It is an explorer and producer of oil, natural gas and natural gas liquid. The leading upstream energy firm primarily has operations in the Permian, the most prolific basin in the United States.
PXD has one of the strongest balance sheets as far as shale producers are concerned, which should help it tide over tough times. The company ended the first quarter with cash and cash equivalents of $1.2 billion and total debt of $5.9 billion, with a very manageable debt-to-capitalization of 21.3%, which is also below the Zacks Oil and Gas Exploration and Production US industry average of 26.8%.
Given its healthy balance sheet, PXD paid out a base dividend of $1.25 per share, with a variable component of $2.09 per share added to it during the first quarter. During the earnings release, Pioneer Natural Resources also authorized a new $4-billion share repurchase program.
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3 Energy Companies With Incredibly Strong Balance Sheets
It is always important for a company to have a stable balance sheet or stockpile cash for future investments and acquisitions. Nobody likes a company to be saddled with debt as the burden of interest expenses can dent its financial flexibility. Overall, a company having a solid balance sheet is part of good fundamentals and deserves a premium.
For a cyclical sector like Oil/Energy, having a good balance sheet is even more important. One thing you don't want to happen is for oil prices to crash with the company being highly levered. As it is, during lean years, the big operators have to borrow to sustain their dividends, while the smaller ones need cash just for survival. This means you want to see low debt levels during those times. On the other hand, when oil and gas prices are high, a rock-solid balance sheet would ensure solid financial footing during lean years.
Below, we discuss three energy companies with a light debt load, healthy balance sheet, and the willingness to distribute its cash to their shareholders. Each of these three companies — Chevron (CVX - Free Report) , ExxonMobil (XOM - Free Report) and Pioneer Natural Resources Company — currently carry a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron: Chevron is one of the largest publicly traded oil and gas companies in the world, with operations that span almost every corner of the globe. The only energy component of the Dow Jones Industrial Average, San Ramon, CA-based Chevron is fully integrated, meaning it participates in every aspect related to energy — from oil production, to refining and marketing.
The company boasts a clean balance sheet, manifested by its fairly low debt-to-equity ratio. As of Mar 31, CVX had $15.7 billion in cash and cash equivalents and total debt of $23.2 billion with a debt-to-total capitalization of a modest 12.6%, well below the Zacks Oil and Gas Integrated International industry average of 24.5%. This is why the supermajor carries a high investment grade rating of AA from S&P, which translates into low borrowing rates.
Chevron is using its balance sheet strength to pay a safe quarterly dividend of $1.51 per share (or $6.04 per share annualized) and run an outsized stock repurchase program of up to $75 billion.
ExxonMobil: Another bellwether in the energy space, ExxoMobil also has a strong balance sheet. XOM’s optimal integrated capital structure that has historically produced industry-leading returns and track of capex discipline across the commodity price cycle make it a relatively lower-risk play in a volatile sector.
ExxonMobil is in excellent financial health. It has AA credit rating, and used its strong balance sheet to invest throughout the pandemic-driven energy market downturn. With $32.7 billion, the company is awash in cash. Moreover, XOM finished the first quarter of 2023 with a total debt of $41.4 billion and a debt-to-total capitalization of just 15.9%.
The company’s fortress-like balance sheet has allowed it to reward shareholders handsomely. ExxonMobil pays a quarterly dividend of 91 cents per share and is on track to buy back up to $17.5 billion during the year.
Pioneer Natural Resources: It is an explorer and producer of oil, natural gas and natural gas liquid. The leading upstream energy firm primarily has operations in the Permian, the most prolific basin in the United States.
PXD has one of the strongest balance sheets as far as shale producers are concerned, which should help it tide over tough times. The company ended the first quarter with cash and cash equivalents of $1.2 billion and total debt of $5.9 billion, with a very manageable debt-to-capitalization of 21.3%, which is also below the Zacks Oil and Gas Exploration and Production US industry average of 26.8%.
Given its healthy balance sheet, PXD paid out a base dividend of $1.25 per share, with a variable component of $2.09 per share added to it during the first quarter. During the earnings release, Pioneer Natural Resources also authorized a new $4-billion share repurchase program.