ExxonMobil (XOM 0.81%) and Chevron (CVX 0.52%) have a growing rivalry. While they will work together on notable large projects, they're still competitors who look out for their shareholders' interests. They're currently engaged in a court battle over Chevron's proposed acquisition of Hess, one of Exxon's partners in Guyana. They also routinely benchmark their metrics against each other and rival integrated energy companies.

While Chevron has edged its bigger rival in some areas, Exxon reigns supreme in others. One area where Exxon is much stronger than Chevron is its balance sheet. Because of that, it has greater financial flexibility, which could come in handy in the future.

Exxon's financial fortress

Exxon ended the first quarter with a debt-to-capital ratio of 16%. That's a low leverage ratio for the oil company. It's well below the company's targeted debt-to-capital range of 20%-25%.

That metric is even lower when factoring in Exxon's massive cash position. Exxon ended the first quarter with $33.3 billion of cash, an increase from $31.6 billion at the end of last year thanks to its strong free cash flow, and its requirement to pause share repurchases ahead of Pioneer Natural Resources' special meeting to vote on Exxon's pending acquisition. Add in its cash, and Exxon's net debt-to-capital ratio was a mere 3%.

The company has enough cash on its balance sheet to fund its dividend outlay of roughly $15 billion per year for two years. It could also fund its current capital spending range, which is $23 billion to $25 billion in 2024, for over a year. That gives the oil giant a lot of cushion. The company could use its cash balance to fund share repurchases during a period of lower oil prices or make an acquisition using cash.

Strong, but not on Exxon's level

Chevron actually has a lower debt-to-capital ratio than Exxon, at 12%. However, it doesn't have anywhere near Exxon's cash position. Chevron's cash balance was $6.3 billion at the end of the first quarter, down from $8.2 billion at the end of last year after the company outspent its operating cash flow on capital expenditures, dividends, and share repurchases, at $4 billion, $3 billion, and $3 billion, respectively. As a result, its net debt ratio was higher at 8.8%.

That's still a strong ratio. Like Exxon, Chevron's leverage target is 20% to 25%. With its net debt ratio well below that range, it has tremendous financial flexibility. For example, Chevron estimates that it can continue repurchasing shares at the low end of its $10 billion-$20 billion annual target range through 2027 at an average oil price in the $50 range in 2025-2027 while maintaining leverage within its target range.

However, while Chevron has a solid cash position, it's nearing its minimum target of keeping $5 billion of cash on the balance sheet. It would have hit that level in the first quarter if it hadn't issued $1 billion of debt and raised $300 million in cash from asset sales and other sources.

Because Chevron has less cash than Exxon, it would need to issue more debt to fund future shortfalls between its cash flow and cash outlays. That would add to its interest expense. On the other hand, Exxon can use its massive cash balance to fund any shortfalls for the foreseeable future.

Exxon's cash war chest gives it more flexibility

ExxonMobil has a much stronger balance sheet than Chevron, thanks to its lower net debt ratio and massive cash position. It gives the oil company a much bigger cushion to weather a future downturn in the energy market. It could use its cash to fund capital projects, maintain its capital return rate, or make an opportunistic acquisition. While Chevron should weather a future storm just fine, it would need to use its balance sheet capacity. That could potentially limit its flexibility if the debt markets are in disarray. Because of that, Exxon is the better option for investors seeking a financial fortress in the oil patch.