World Stock Watch

Oil Industry Leader ExxonMobil Faces Profit Dip, But Long-Term Growth Remains Strong

ExxonMobil, the largest and most profitable oil company, has recently issued a profit warning for the fourth quarter. Despite this, the company’s long-term growth prospects remain robust, driven by its industry-leading profitability, strong cash flow generation, and ambitious plans for the future.

Challenging Quarter Ahead

ExxonMobil expects to report earnings of $1.76 per share in the fourth quarter, below analysts’ expectations and its year-ago performance. The company faced several headwinds during the period, including lower refining margins, weaker gasoline demand, and impairments. These challenges reduced earnings by around $1.5 billion.

Upstream Strength Offsets Refining Weakness

Despite the refining segment’s struggles, ExxonMobil’s upstream oil and gas production business remains strong. The company expects earnings from this segment to increase by around $400 million, driven by a 30% rebound in natural gas prices in the U.S.

2030 Plan: A Path to Increased Profitability

ExxonMobil has unveiled its 2030 plan, aiming to deliver an incremental $20 billion in earnings and $30 billion in free cash flow by 2030. The plan is fueled by several factors, including:

• Pioneer Natural Resources Acquisition: Exxon expects annual synergies from the acquisition to be 50% more than initially expected, or around $3 billion.
• New Business Growth: The company expects to grow earnings from new businesses, such as lithium and carbon capture and storage, to $3 billion.
• Structural Cost Savings: Exxon is adding $7 billion to its structural cost savings target.
• High-Return Capital Investments: The company plans to deploy $140 billion over the next several years into major capital projects and developing the Permian Basin, generating returns above 30%.

Value Creation for Investors

ExxonMobil’s strategy positions the company to create significant value for investors over the coming years. With a massive $165 billion in surplus cash expected by 2030, the company will continue to increase its dividend and repurchase shares. Assuming reasonable market conditions, Exxon plans to repurchase $20 billion of its shares in 2025 and 2026.

A Buying Opportunity?

Weaker market conditions have weighed on ExxonMobil’s stock price, which currently sits about 15% below its 52-week high. However, given the company’s long-term growth prospects, this dip may present a great buying opportunity for long-term investors.