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3 Energy Companies Supported by Excellent Balance Sheets
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In the business world, a stable balance sheet and ample cash reserves are indispensable, especially in the cyclical Oil/Energy sector. A solid financial foundation not only enhances a company's valuation but also serves as a safeguard during industry downturns.
Excessive debt can erode financial flexibility, making low debt levels crucial in times of plummeting oil prices. Major players may need to borrow during lean years, while smaller entities require cash for survival. Conversely, in periods of soaring oil and gas prices, a robust balance sheet provides a financial stronghold.
The unpredictable nature of the sector underscores the strategic imperative of maintaining a healthy balance sheet. This key factor can determine a company's ability to thrive during periods of plenty and weather the storms of a volatile industry.
Below, we discuss three energy companies with a light debt load, healthy balance sheet, and the willingness to distribute cash to their shareholders. Each of these three companies — Chevron (CVX - Free Report) , ExxonMobil (XOM - Free Report) and Coterra Energy (CTRA - Free Report) — currently carries 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 Sep 30, CVX had $5.9 billion in cash and cash equivalents and a total debt of $20.6 billion with a debt-to-total capitalization of a modest 11%, well below the Zacks Oil and Gas Integrated International industry average of 23.5%. 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, ExxonMobil also has a strong balance sheet. XOM’s optimal integrated capital structure that has historically produced industry-leading returns and an impressive track of capex discipline across the commodity price cycle makes it a relatively lower-risk play in a volatile sector.
ExxonMobil is in excellent financial health. It has an AA credit rating, and used its strong balance sheet to invest throughout the pandemic-driven energy market downturn. With $33 billion, the company is awash in cash. Moreover, XOM finished the third quarter of 2023 with a total debt of $41.3 billion and a debt-to-total capitalization of just 15%.
The company’s fortress-like balance sheet has allowed it to reward shareholders handsomely. ExxonMobil pays a quarterly dividend of 95 cents per share and is on track to buy back up to $17.5 billion during the year.
Coterra Energy: It is an explorer and producer of oil, natural gas and natural gas liquid. Headquartered in Houston, TX, the firm is focused on the Permian Basin, Marcellus Shale and Anadarko Basin.
CTRA 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 third quarter with cash and cash equivalents of $856 million and total debt of $2.2 billion, with a very manageable debt-to-capitalization of 14.5%, which is also below the Zacks Oil and Gas Exploration and Production US industry average of 26.1%.
Given its healthy balance sheet, CTRA paid out a base dividend of 20 cents per share. This yields above 3% — well above the S&P 500 and one of the highest in the upstream energy space. Coterra also has an active share repurchase program, with $1.6 billion existing under authorization.
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3 Energy Companies Supported by Excellent Balance Sheets
In the business world, a stable balance sheet and ample cash reserves are indispensable, especially in the cyclical Oil/Energy sector. A solid financial foundation not only enhances a company's valuation but also serves as a safeguard during industry downturns.
Excessive debt can erode financial flexibility, making low debt levels crucial in times of plummeting oil prices. Major players may need to borrow during lean years, while smaller entities require cash for survival. Conversely, in periods of soaring oil and gas prices, a robust balance sheet provides a financial stronghold.
The unpredictable nature of the sector underscores the strategic imperative of maintaining a healthy balance sheet. This key factor can determine a company's ability to thrive during periods of plenty and weather the storms of a volatile industry.
Below, we discuss three energy companies with a light debt load, healthy balance sheet, and the willingness to distribute cash to their shareholders. Each of these three companies — Chevron (CVX - Free Report) , ExxonMobil (XOM - Free Report) and Coterra Energy (CTRA - Free Report) — currently carries 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 Sep 30, CVX had $5.9 billion in cash and cash equivalents and a total debt of $20.6 billion with a debt-to-total capitalization of a modest 11%, well below the Zacks Oil and Gas Integrated International industry average of 23.5%. 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, ExxonMobil also has a strong balance sheet. XOM’s optimal integrated capital structure that has historically produced industry-leading returns and an impressive track of capex discipline across the commodity price cycle makes it a relatively lower-risk play in a volatile sector.
ExxonMobil is in excellent financial health. It has an AA credit rating, and used its strong balance sheet to invest throughout the pandemic-driven energy market downturn. With $33 billion, the company is awash in cash. Moreover, XOM finished the third quarter of 2023 with a total debt of $41.3 billion and a debt-to-total capitalization of just 15%.
The company’s fortress-like balance sheet has allowed it to reward shareholders handsomely. ExxonMobil pays a quarterly dividend of 95 cents per share and is on track to buy back up to $17.5 billion during the year.
Coterra Energy: It is an explorer and producer of oil, natural gas and natural gas liquid. Headquartered in Houston, TX, the firm is focused on the Permian Basin, Marcellus Shale and Anadarko Basin.
CTRA 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 third quarter with cash and cash equivalents of $856 million and total debt of $2.2 billion, with a very manageable debt-to-capitalization of 14.5%, which is also below the Zacks Oil and Gas Exploration and Production US industry average of 26.1%.
Given its healthy balance sheet, CTRA paid out a base dividend of 20 cents per share. This yields above 3% — well above the S&P 500 and one of the highest in the upstream energy space. Coterra also has an active share repurchase program, with $1.6 billion existing under authorization.