Demand for energy is at an all-time high and still growing. Economic expansion and new drivers like artificial intelligence (AI) are set to keep oil demand climbing until 2030, while natural gas demand is projected to jump over 20% by 2040. Meanwhile, demand for cleaner energy is accelerating.
This outlook bodes well for global energy giant ExxonMobil (XOM). The company has a clear line of sight to deliver robust earnings and cash-flow growth through 2030. Meanwhile, its growing investments in lower-carbon energy put it in a strong position to meet future energy demand. These features make ExxonMobil a smart stock to buy and hold through at least 2030.
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Exxon's plan to 2030
ExxonMobil has a blueprint through 2030. The energy company plans to invest about $140 billion over the next five years in major growth capital projects and its Permian Basin development program. Growth projects include several offshore developments in Guyana, liquefied natural gas (LNG) projects worldwide, and multiple product solutions projects such as chemical complex upgrades and expanding its thermoset resin manufacturing capacity.
Exxon is also investing in several lower-carbon energy businesses, including carbon capture and storage, lithium, and hydrogen. The company is pursuing up to $30 billion of lower-emission opportunities over the next five years. The energy company anticipates that new businesses, such as those focused on lower-carbon energy, will contribute $3 billion to its annual earnings by 2030 and potentially up to $13 billion by 2040.
The energy giant anticipates that its capital investments will deliver returns in excess of 30% over their lifetime. This drives the company's confidence in its ability to increase its annual earnings capacity by $20 billion and its cash-flow-generating capability by $30 billion by 2030, with oil prices at around $65 per barrel (right at the current price). This results in compound annual growth rates of 10% and 8% respectively. These are strong growth rates for such a large company.
Another catalyst fueling Exxon's earnings growth plan is its cost-savings initiatives. Since 2019, Exxon has delivered $13.5 billion in structural cost savings, surpassing the total of all its peers combined. By 2030, the company expects that number to reach $18 billion by continuing to simplify business processes, optimizing its supply chain, and modernizing its technology.
Returning its growing windfall
Exxon's growing earnings and cash flow position the oil giant to generate a tremendous amount of surplus cash. Despite spending about $140 billion on capital expenditures over the coming years, Exxon estimates that it will produce a cumulative $165 billion in free cash flow during the plan period.
The company will likely distribute the bulk of that surplus to shareholders since it already has the strongest balance sheet in the oil patch. Exxon ended the second quarter with an industry-leading 8% net leverage ratio, backed by a $15.7 billion cash balance.
ExxonMobil will undoubtedly continue to increase its dividend. The oil giant has raised its payout for an industry-leading 42 consecutive years, a level achieved by only 4% of companies in the S&P 500.
The energy company will also continue to repurchase a significant number of shares each year. Exxon plans to repurchase $20 billion of shares in 2025 and the same amount in 2026, assuming reasonable market conditions. The company could increase its buyback capacity in 2027 and beyond if oil prices remain at or exceed current levels.
A clear path to grow shareholder value through 2030
ExxonMobil is on track to deliver strong earnings and cash-flow growth over the next several years. Its plan balances investment in oil and gas with expanding its cleaner energy businesses to drive rising free cash flow. The company expects to return most of this surplus cash to shareholders. This fuels the view that ExxonMobil could deliver robust returns for investors through at least 2030, making it a potentially smart buy right now.
