Exxon Mobil is a leading integrated energy company in the world. The company mainly engages in the exploration, production and transportation of crude oil, natural gas, petroleum products. It is also one of the largest chemical manufacturing companies in the world and owns a world class fuels and lubricants business.
Exxon Mobil has a diverse portfolio of quality projects across Upstream, Downstream, and Chemical businesses. Accounting for 55% of 4Q18 earnings, the upstream business is Exxon Mobil’s primary business followed by downstream, chemicals and corporate & financing. The company market its fuels and other products to millions of customers through Esso, Exxon and Mobil-branded retail service stations.
Exxon Mobil has a geographical presence predominantly in the US, Canada, Europe, Asia Pacific and the Middle East. The company has a presence in most of the world’s countries and operates refining and lubricant blending facilities in 25 countries and chemical operations in 16 countries.Investment Data
- Opportunity Score: 55
- Ticker: NYSE:XOM
- Sector: Energy
- Industry: Oil & Gas Integrated
- Market Cap: 144.44B
- P/E: 20.35
- Dividend Yield: 10.19%
- Payout Ratio (Earnings): 207.14%
- S&P Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 6/10
- Dividend Income Fit: 5/10
Revenue Growth & Market Exposure
ExxonMobil operates in both upstream and downstream parts of the value chain, which makes it relatively immune to oil price fluctuations. With over 125 years in business, the company has built a leading position in petroleum and petrochemical industries. Exxon is also well positioned across the natural gas value chain in most of the major markets.
Oil & gas is a highly capital intensive industry which is a strong entry barrier for newcomers. ExxonMobil stands to benefit from a growing global demand for energy, given its economies of scale, strategic pipeline networks, extensive global distribution channels, and an integrated business model. These competitive advantages enable long term value creation for the company as well as its shareholders. Its chemical manufacturing business is also one of the largest in the world with operations in key global markets. These products are crucial and form building blocks for a wide range of consumer and industrial products of daily use.
ExxonMobil is growing its portfolio value by significant investments across Permian, Guyana, Brazil, Mozambique, and PNG. These investments are expected to drive ~50% of upstream earnings by 2025. Exxon is also investing in the improvement of the Kearl site and is planning to increase production to 240 Kbd by 2020. Kearl is considered as one of Canada’s highest-quality oil sands deposits. In its chemical business, Exxon is focusing on growing new sales volume in North America and Asia. The company continually invests in the development of advanced technologies and towards maximizing value across the entire value chain. All these investments should drive top-line growth for the company.
ExxonMobil is a dividend aristocrat with a 36-year long history of consecutive dividend increases. The company has an attractive dividend yield of 4%+ and a payout ratio of 67%. Its 10-year dividend CAGR stands at 7.6% and the company last raised its dividend by 6.5%. The pace of growth has picked up in recent years given the improvement in the oil price.
The company has generated positive free cash flow in each of the last 10 years. ExxonMobil is expecting earnings to grow by more than 40% and cash flow by 55% in a robust price environment. The company plans to pay 50% of its cash flow as dividends to its shareholders. Since the Exxon and Mobil merger, the company has generated close to 20% returns.
The world has a growing demand for energy led by increasing population, electricity and industrial needs. According to IEA, ExxonMobil is expected to invest $30-$35 billion every year to cater to the $21 trillion of oil and gas investment needed by 2040. Given its investments in innovative technologies and a vertically integrated business model, the company should continue growing dividends in the low single digit range. ExxonMobil can leverage from its global presence, integrated businesses, scale advantage, and close industry connections to grow in the future.
Some of the large energy companies like Royal Dutch Shell, Total SA, ConocoPhillips, Chevron Corp are leading competitors of ExxonMobil. Chevron and Shell are leading integrated energy companies in the world engaging in the exploration, production, and transportation of crude oil and natural gas; as well as manufacturing and marketing of chemicals, whereas ConocoPhillips is the largest independent E&P company globally, based on production and proved reserves.
ExxonMobil commands leading global market positions in most of the businesses it serves. It is the largest global refiners and marketers of finished lubricants and operates one of the largest chemical manufacturing business in the world. The company stands a good chance to benefit from long term growth opportunities across both upstream and downstream businesses. Excellence in execution and applied technologies, rich experience, and knowledge, and a large global presence strongly positions ExxonMobil to meet the world’s growing natural gas and power demand.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.