Exxon Mobil (XOM) is one of the world's biggest oil producers. The company operates 37 refineries in 21 countries and it keeps investing for more. Everyone in the investment world knows about Exxon and the company is one of the all time favorites as far as fund managers go. On the other hand, one can't help but wonder where the company will be in about 30 years. Many believe that we are experiencing, or already experienced peak oil, and many oil reserves may be depleted in the near future. Here we will look at Exxon Mobil in 2040.
Some may be wondering why we should care about 2040. There are many younger investors (i.e., late twenties to early forties) like myself who believe in the power of compounding and would like to know whether this is the stock to hold for the rest of our lives.
First of all, let's look at some statistics regarding Exxon Mobil's capacity today. The company produces about 3.92 million barrels of oil everyday out of a full capacity of 6.3 million barrels a day. The company sits on billions of barrels of proven reserves, and these reserves are expected to last for 14 years even if the company does not find any additional oil reserves. Also, historically the company replaces 95% of the oil and 165% of the natural gas it produces. This means, for every 100 barrels of oil Exxon extracts, it is able to find 95 barrels of new oil reserves. Will this trend continue forever? Probably not, as there is limited amount of oil in the world.
Because many investors of Exxon Mobil want to take advantage of the company's dividends for the rest of their lives, it's normal for them to be concerned about where the company will be in 2040. The company recently published an article talking about the exact same topic. Here are some highlights from the article:
- Exxon Mobil thinks that global energy demand will be about 30 percent higher in 2040 compared to 2010.
- 60% of this new demand is expected to come from currently developing nations while the demand in developed nations is not expected to increase much. This is because, despite population increase in this countries, the vehicles and tools will increasingly become energy-efficient.
- Electricity generation will account for more than 40% of global energy consumption.
- Most of the new oil production will come from unconventional sources such as offshore production.
- Demand in natural gas will rise by 60% from 2010 to 2040. The company will have no trouble meeting such demand.
- "Exxon Mobil also is making significant investments in oil sands, deep-water and Arctic production, and the oil and natural gas supplies found in shale and other rock formations."
- The company believes that only 45% of the world's oil reserves have been depleted by now, which means there is still plenty of oil to go around for decades to come.
- The company believes that by 2040, we will have used only half of the proven oil reserves in the world.
In conclusion, investors can be confident that there will be supplies as well as demand well into 2040 and later. Those invested in Exxon Mobil and other oil companies can stay invested for decades to come.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.