ExxonMobil (XOM 1.78%) is the undisputed leader in the oil patch. That was abundantly clear when taking a look at its recent third-quarter earnings report. The oil giant delivered industry-leading earnings and cash returns.
Here's a closer look at the numbers showing that ExxonMobil is the top oil stock.
NYSE: XOM
Key Data Points
Drilling down into ExxonMobil's third-quarter results
ExxonMobil is a well-oiled machine these days. The oil giant produced an average of 3.2 million barrels per day of liquids (oil and natural gas liquids) during the third quarter. That was the company's highest-liquids output in over 40 years. Add in its gas production, and Exxon's total output averaged nearly 4.6 million barrels of oil equivalent per day (BOE/d). Exxon's production has averaged 4.2 million BOE/d this year, a whopping 14% increase from last year.
The integrated-energy company also delivered strong operating results in its product-solutions segment (refining and chemicals). Its high-value product-sales volume soared 10% to a new record.
Despite weaker market conditions during this period, Exxon still produced robust profits and cash flow. It reported $8.6 billion in earnings, which led all international oil companies (IOCs). Meanwhile, it generated $17.6 billion in cash flow from operations in the quarter, which also led IOCs. After capital expenses, its free cash flow was strong at $11.3 billion. That pushed its year-to-date totals to $42.8 billion of cash flow from operations and $26.4 billion of free cash flow.
Fueling Exxon's gushing profits is its strategy of investing in its advantaged assets, which are its lowest-cost (and lower-emissions) operations. The company delivered record production in Guyana and the Permian Basin, with the latter due in part to its acquisition of Pioneer Natural Resources. More than 50% of the company's production now comes from advantaged assets, which are enabling it to make more money per barrel produced. Exxon is also benefiting from structural cost-savings initiatives, which have shaved an additional $1.6 billion from its cost structure this year (including $600 million during Q3).
Returning the growing windfall to shareholders
Exxon is reinvesting a meaningful portion of its robust cash flows into maintaining and expanding its operations. Its capital and exploration expenditures have totaled $20 billion year to date, keeping the company on pace with its $28 billion budget. It's investing that capital to develop its advantaged assets and expand its lower-carbon businesses. These investments should help fuel its growth in the coming years.
The oil giant is returning much of its excess free cash to shareholders. It has distributed an industry-leading $26.1 billion of cash to investors, including paying $12.3 billion in dividends and repurchasing $13.8 billion in shares. Those robust cash returns have enabled Exxon to deliver industry-leading, total-shareholder returns of 20% year to date (it has also led its peers over the last three-, five-, and 10-year periods).
It expects its cash returns to rise in the future. Exxon plans to repurchase over $19 billion of its stock this year. In addition, it recently increased its quarterly dividend by 4.2% per share. That marks 42 consecutive years of annual-dividend increases, which lead all IOCs.
Even with those robust cash returns, Exxon maintained its top-tier balance sheet. The company had a low 13% debt-to-capital ratio and a 5% net-debt-to-capital ratio after factoring in $4.7 billion of debt repayments and its $27 billion cash balance at the end of Q3. That strong financial position gives Exxon the flexibility to continue investing in its advantage assets and return cash to shareholders if oil prices fall.
The top dog in the oil patch
ExxonMobil leads its peers in making money and returning cash to its shareholders. That's mainly due to its investments in its advantaged assets and structural cost-savings initiatives, which enable it to make more money per BOE. With those investments and initiatives ongoing, Exxon is putting itself in the position to make even more money in the future, which would give it more cash to return to its investors. Because of that, Exxon should have no trouble maintaining its lead as the best company in the oil sector.
