ExxonMobil (XOM 1.42%) has built a premier oil company. The energy giant has an unrivaled asset base. It controls a treasure trove of low-cost oil and gas around the world. The company also has an integrated products solutions business in chemicals and refining that enables it to maximize nearly every molecule of hydrocarbons it produces.
The oil company's competitively advantaged asset base has enabled it to produce unrivaled earnings and returns compared to its peers in the oil patch. Here's a closer look at Exxon's dominance over its rivals, which could continue for many years to come.
NYSE: XOM
Key Data Points
An unmatched value proposition
ExxonMobil CEO Darren Woods showcased the strength of the company's portfolio and strategy when speaking on the fourth-quarter earnings conference call:
We are creating unmatched value for our shareholders. Compared to the IOCs (international oil companies) over the last five years, we've grown cash flow from operations at a roughly 15% compounded annual growth rate, more than double the closest competitor. We've distributed more than $125 billion in dividends and buybacks, $30 billion more than the closest competitor. And we delivered a total shareholder return compounded annual growth of 14%, 600 basis points higher than the closest competitor.
Exxon isn't just delivering industry-leading results; it's absolutely crushing its peers in every crucial category. For example, last year, the company reported $34 billion in earnings and $55 billion in cash flow from operations. Both were its third highest tally in the past decade despite weaker market conditions. For comparison, Chevron's adjusted earnings were $18.3 billion, and its cash flow from operations was $31.5 billion, while Shell reported $23.7 billion in adjusted earnings and $54.7 billion in cash flow from operations. Exxon also distributed $36 billion in cash to its shareholders through dividends and repurchases. That was more than all but five companies in the S&P 500 and exceeded the cash returns of Chevron, at $27 billion, and Shell, at $22.6 billion.
A big factor fueling its ability to produce industry-leading earnings and cash returns is its capacity to earn high returns when investing in developing its advantaged asset base. Woods noted on the call that Exxon delivered a return on capital employed (ROCE) of 13% last year and an industry-leading average of 11% over the past five years. Strip out its massive cash balance of $23.2 billion at the end of last year, along with projects under construction that haven't yet started up, and its ROCE rises to about 17% last year and an average of 15% over the past five years. The company's disciplined investment approach and high-quality asset base drive those robust returns.
Plenty more in the tank
Exxon is in an excellent position to continue delivering industry-leading results in the future. Woods noted on the call:
Looking ahead, the value creation arc of the company is equally distinguished. We're going to build an even more advantaged asset portfolio with 60% of our upstream production from advantaged assets by 2030. That's nearly the same amount as the next largest IOC's total production. We're going to develop an even more profitable product mix with 80% growth of high-value product sales and product solutions by 2030. We're going to be an even more efficient operator, taking an additional $6 billion in cost out of the business. We're going to generate even more earnings in cash on a constant price and margin basis.
The company aims to deliver an additional $20 billion in earnings and $30 billion in cash flow by 2030. That would further widen its lead over its peers in the oil patch.
Exxon's strategy is highly achievable and already in motion. For example, it has several major growth projects on track to start up this year, including its fourth and largest development in Guyana, its Golden Pass LNG project in the U.S., and a major upgrade project at its Singapore refining and chemical complex. These projects should add more than $3 billion to Exxon's earnings by 2026. Exxon is also investing heavily in growing its production in the Permian Basin, which will get a boost from last year's acquisition of Pioneer Natural Resources. The company expects to capture more than $3 billion in synergies from that deal over the next decade while growing its combined output in the Permian by 50% by 2030.
A well-oiled, value-creating machine
ExxonMobil is the unrivaled leader of the oil patch. It should continue to lead its peers in the future, fueled by its heavy investment in developing its best-in-class asset base. The company is in a strong position to deliver peer-leading total returns in the future, making it a top oil stock to buy and hold for the long haul.
