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Exxon Mobil: Double-Digit Shareholder Rewards With A Single-Digit 2025 P/E Ratio

Mar. 08, 2020 1:41 PM ETExxon Mobil Corporation (XOM)174 Comments


  • Exxon Mobil has an impressive portfolio of assets. The company has significant upstream assets, with major deepwater drilling, Permian Basin growth, and LNG.
  • XOM is also focused on its downstream and chemical businesses to maximize margins. That will combine well with the company's upstream portfolio growth.
  • Earnings should grow significantly, decreasing its P/E ratio towards the single digits and enabling double-digit shareholder rewards.
  • I do much more than just articles at The Energy Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Exxon Mobil (NYSE:XOM) is the largest publicly traded oil company in the world (outside of Saudi Aramco). This is despite COVID-19 fears pushing the company's market capitalization towards $200 billion and dividend yields towards 7%. The company recently had its 2020 investor day, highlighting its potential to generate shareholder value, something that makes it a strong, long-term investment.

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Upstream Potential

Exxon Mobil is primarily focused on the upstream sector of its portfolio, something that's easily the most exciting aspect of its portfolio. The company is planning on spending billions annually on this part of the portfolio, something that could accommodate numerous acquisitions.

Investor Presentation

The upstream portfolio is centered on three major segments - the company's unconventional Permian Basin assets, Guyana and Brazil deepwater assets, and PNG and Mozambique LNG assets. These three major segments of the company's portfolio will result in more than half of its production by late 2020s and generate double-digit returns at low prices.

However, it's worth noting that LNG prices have dropped well below $5/mbtu across a number of markets recently.

Permian Assets - Investor Presentation

In the Permian Basin, Exxon Mobil built up a massive portfolio with a resource base of ~10 billion barrels. The company is focused on building a portfolio of mature infrastructure, capturing land synergies where available. It has developed a mere 20% of its resources in the developed Midland basin and believes it can sustain the current development pace past 2025.

Given that the Permian Basin is seeking to increase daily production past 1 million barrels/day, the company would have a multi-decade resource runway. That's enough to sustain long-term production. Exxon Mobil's Permian Basin production has grown significantly from 50 thousand barrels/day in 2015 to 250 thousand barrels/day in 2019.

By 2020, the company anticipates reaching almost 400

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