ExxonMobil (XOM 1.15%) recently confirmed plans to move forward with a fifth oil production project off the coast of Guyana. The proposed offshore project would cost 27% more than the last one. It would deliver its first oil in 2027, after which it should produce at a steady rate for two decades. 

It's a massive undertaking for the company and its partners, Hess (HES 1.69%) and CNOOC, representing a bold bet on the oil market's future. Here's a closer look at ExxonMobil's latest multibillion-dollar drilling development and whether it should be viewed as a catalyst for buying the red-hot oil stock. 

Drilling down into ExxonMobil's latest project

According to a report by Reuters, ExxonMobil is planning to approve its fifth oil production project in Guyana. The Uaru development would cost an estimated $12.68 billion, or 27% more than the $10 billion price tag of the company's fourth project in the region (One Guyana). It's expected to produce 250,000 barrels of oil per day (BPD) -- the same production level as One Guyana -- a capacity it should be able to maintain for about two decades. Inflation and a larger project scope are responsible for Uaru's higher expected costs. 

ExxonMobil and its partners have already committed to invest $30 billion to build the first four Guyana projects. ExxonMobil is the operator and is funding 45% of the capital investment. Hess holds a 30% stake, and CNNOC is a 25% partner. The fifth project would increase their Guyana production capacity to 1.2 million BPD by 2027. That puts them on pace to triple their output from last year's total within the next few years.

Guyana has been a game-changer for ExxonMobil and Hess. The companies made their first offshore discovery in that nation's waters in 2015 and started producing from the region in 2019. ExxonMobil has made more than 30 discoveries there, uncovering an estimated 11 billion barrels of oil. Guyana believes there's more crude underneath its waters and estimates its resources to be as much as 25 billion barrels. It's planning to auction off more acreage licenses to entice other companies to explore off its shores.

A record-setting year

ExxonMobil's strategy to continue investing in oil and natural gas projects has paid big dividends over the past year. It has capitalized on its growing production from low-cost regions like Guyana to cash in on higher prices, and set a quarterly profit record of $19.7 billion in Q3. While it expects its fourth-quarter earnings to fall from that peak, it was on track to produce record full-year profits of roughly $58 billion. That would vastly exceed its prior peak of $45 billion in 2008, when oil prices climbed for a brief period to $142 per barrel. ExxonMobil's surging earnings and cash flow in 2022 gave it the funds to increase its dividend, repurchase stock, reduce debt, and invest in expanding its operations.

The earnings surge and increased cash returns helped fuel a massive spike in ExxonMobil's stock price. Shares have rocketed upward by nearly 85% since the start of last year. They currently sit just below their all-time high of $114.18 per share, which they set in late November.

Despite that much higher stock price, ExxonMobil still trades at a reasonable valuation of less than 10 times earnings and free cash flow. That's cheaper than the broader market, given the S&P 500's current price-to-earnings ratio of more than 17. ExxonMobil also has a higher dividend yield (3.2%) than the S&P 500 (1.7%). 

Weighing on ExxonMobil's valuation is the uncertainty surrounding the future of oil as the global economy works to transition to lower-carbon energy sources. That could lead to lower oil demand and put pressure on prices.

However, ExxonMobil management firmly believes that oil will remain a vital fuel for decades. It expects the global oil market to reach $6.5 trillion by 2050, up from $4.6 trillion last year. That's why it's investing heavily to grow its oil output from places like Guyana.

One big driver of ExxonMobil's confidence in the oil market's future is the potential for carbon capture and storage to remediate fossil fuel emissions, which could potentially allow the world to make strides on effectively combating climate change without completely shifting to alternative energy sources. ExxonMobil sees carbon capture growing to a $4 trillion market by 2050. Carbon capture is one of several lower carbon investments ExxonMobil is making to drive its growth. 

ExxonMobil still looks attractive

Shares of ExxonMobil have continued to rally even though oil prices have cooled off considerably in recent months. That's partly because many expect crude prices to head higher this year. Meanwhile, the company's future remains bright due to growth catalysts like its Guyana fields and carbon capture. Because of that, ExxonMobil's stock still looks like an attractive long-term investment opportunity despite its near-record share price.