Exxon Mobil (XOM)

Exxon Mobil is a US-based oil and gas company that was created in 1999 when Exxon Corporation and Mobil Corporation merged. It is considered one of the top three energy companies in the world, with investments and operations in coal, natural gas, petroleum, chemicals, nuclear fuels, and mineral ores. Exxon Mobil is very active in the petroleum industry and owns oil fields, channels, service stations, and a large line of tankers. The company’s roots can be traced back to Standard Oil, where both Exxon and Mobil began in the late 1800s. To this day, Exxon Mobil remains one of the largest oil companies in the world.

2020: Exxon Mobil recovers

Exxon Mobil recovered from a difficult year in 2020 due to the pandemic and rose from the 10th to the 6th spot on the Fortune 500 list. The company responded to the drop in energy demand and oil and gas prices caused by COVID-19 by reducing costs, which included cutting its workforce by 9,000. These measures, combined with the rebound in oil prices, led to Exxon Mobil achieving its largest annual profit in seven years in 2021, with a total earning of more than $23 billion.

In the wake of Russia’s invasion of Ukraine in February 2022, the company withdrew from its Sakhalin-1 oil development in Russia and announced a potential write-down of up to $4 billion, following the lead of BP and Shell in divesting from Russia.

Exxon Mobil has long faced criticism for contributing to climate change and has established a new company called Exxon Mobil Low Carbon Solutions to commercialise technologies that could help achieve net-zero emissions.

Who is Exxon?

Exxon Corporation, previously known as Standard Oil Company (New Jersey) until 1972, was a former oil and natural resources company that merged with Mobil Corporation to become Exxon Mobil in 1999. The company was established in 1882 as part of the Standard Oil Trust and became a multinational corporation over time. The New Jersey company was ordered by the U.S. Supreme Court to divest itself of 33 American subsidiaries in 1911.

Exxon went on to acquire many companies, including Imperial Oil Limited in Canada and Arabian-American Oil Company (later known as ARAMCO) in 1948.

In 1926, Exxon introduced the Esso trade name and applied it to many of its products and companies, but later had to switch to the Exxon name in 1972 due to legal disputes with other Standard Oil companies.

Prior to the merger with Mobil, Exxon was involved in various aspects of the petroleum industry, as well as natural gas, coal, nuclear fuels, chemicals, and mineral ores such as copper, lead, and zinc. Exxon also had a large fleet of tankers for oil transport through pipelines.

Who is Mobil Corporation?

Exxon Mobil Corporation was formed in 1999 when Mobil Corporation, a former American petroleum and chemical company, merged with Exxon. Mobil Oil has a history dating back to the 19th century, with origins including Vacuum Oil Company and Standard Oil Company of New York.

After becoming independent in 1911, the two merged in 1931 to form Socony-Vacuum Corporation, which later changed its name to Mobil Oil Corporation in 1966.

In the 1970s, Mobil diversified its holdings by acquiring Marcor Inc., which included Container Corporation of America and Montgomery Ward & Co. Mobil later sold these businesses to focus on petroleum extraction, processing, and distribution.

Despite the merger with Exxon, Mobil’s iconic logo of Pegasus, the winged horse, remained on all products bearing the Mobil brand name.

Exxon (NYSE: XOM): Buy, Sell or Hold?

Exxon had an outstanding financial year in 2022 and as a result, they have announced a share buyback program worth $50 billion. As long as there isn’t a significant drop in oil prices, Exxon’s stock is expected to continue to rise.

• Exxon’s Performance in 2022

Exxon Mobil Corporation, listed under NYSE: XOM, has achieved a total return of over 86% (including dividends) since January 1, 2022, while the S&P 500 (SPY) has experienced a negative return of -14%. Investors are now questioning whether this increase is sustainable or if they should expect lower returns in the future. With a market value second only to Saudi Aramco (ARMCO), Exxon is the second-largest oil company.

Exxon has shown remarkable performance over the past year when compared to other stocks in the oil sector. Among these stocks, only BP (BP) surpassed Exxon’s performance, achieving a return of 39% compared to Exxon’s 29%. BP’s success was unexpected, but its CEO’s announcement of reducing ESG commitments due to the poor return profile associated with ESG projects caused the stock to surge.

Exxon Mobil had its most successful year in 2022, with profits projected to reach an all-time high of approximately $58 billion. The company also generated record-free cash flows and plans to reward shareholders with increased dividends and share buybacks.

The company is expected to announce strong Q4 earnings, with analysts estimating an adjusted EPS of $3.29, indicating a year-over-year growth rate of around 60%.

• Exxon Risks

Analysts have identified certain risks associated with investing in Exxon. The company acknowledged in a filing with the SEC on the 4^th of January that lower oil and gas prices will have a negative impact on profitability. For instance, if the oil prices drop to $50 per barrel, Exxon’s cash flow may still be substantial, but it will not be able to sustain its current stock price, even with share buybacks. Additionally, oil companies face regulatory risks.

• Exxon: Bright future ahead

However, despite these potential challenges, Exxon is committed to improving its performance over the long run and rewarding shareholders through dividend increases and share buybacks. Despite the potential challenges that the company could face in 2023, Exxon’s bright future is evident.

Therefore, several analysts have suggested that investing in Exxon at its current price is an excellent opportunity for long-term investors. Other analysts are cautiously optimistic due to the elevated stock price levels.

The possibility of a recession and lower prices for oil and gas may have a negative effect on earnings and cash flow in the short run. Nonetheless, it is predicted that the stock will produce attractive profits for investors in the long run.

2023 and beyond

ExxonMobil presented its five-year plan in December, outlining its long-term vision. The company anticipates doubling its earnings and cash-flow growth by 2027 compared to 2019 levels. In FY2019, ExxonMobil recorded an adjusted EPS of $3.36 per share and generated $29.7 billion in cash flow from operations.

To achieve this goal, the company plans to maintain its annual capital expenditures at $20 billion to $25 billion while increasing its investments in lower-emission initiatives by 15% to $17 billion until 2027.

Furthermore, ExxonMobil aims to expand its production by 500,000 oil-equivalent barrels per day to reach 4.2 million, with a focus on high-return, low-cost projects.

XOM: Solid returns

XOM has increased its share repurchase plan from $30 billion to $50 billion in line with its long-term strategic plan. The plan is effective until 2024, with $15 billion expected to have been completed in 2022, leaving $35 billion to be bought back over the next two years. This means a 7.7% return on the current market cap of $455 billion. Additionally, XOM raised its dividend to $0.91 in November, resulting in an attractive current dividend yield of 3.3%. If you are interested in trading stocks through CFDs, IronFX offers a wide range of the most popular companies with extremely competitive trading conditions. If you don’t already have an account, open a trading account and explore the best that the solid broker has to offer.

Disclaimer:

This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.