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The new US President Donald Trump wants to make the US the dominant export nation for oil and gas. His well-known exclamation ‘Drill Baby drill’ is perhaps still fresh in the minds of many from the election campaign or his inaugural address. Trump wants to tap gas reserves in Alaska and has banned the licensing of new offshore wind farms for an indefinite period. In addition, tax breaks for American oil and gas companies are on the cards. This could mean new record profits for the major US oil majors. Are these golden times for shareholders in the largest American oil company, ExxonMobil (ISIN: US26856L1035)?
Source: ExxonMobil stock StocksGuide
ExxonMobil has the largest and most productive network of oil and gas deposits in the world. The company is well positioned for the future, even without Trump's support. The Americans have mining rights in the ‘gold vein’ in Guyana. Guyana is a neighbouring country of Venezuela, where most of the known oil and gas reserves are located. In addition, ExxonMobil was able to bag a $60 billion deal in 2023 with the acquisition of Pioneer Natural Resources. With this acquisition, the Spring, Texas-based company was able to secure further capacity in the US.
Is ExxonMobil at the beginning of a supercycle? We address this question in an ExxonMobil stock analysis and take a closer look at the largest energy company in the West.
The history of ExxonMobil goes back to the days of John D. Rockefeller, who founded his Standard Oil company at the end of the 19th century. After the monopoly was broken up at the beginning of the 20th century into 34 individual companies, Jersey Standard (later Exxon) and Vacuum Oil (later Mobil) were also formed as two sub-companies of what is now the largest oil major in the Western world. The merger took place in 1999.
ExxonMobil is a classic oil and gas company that extracts oil and gas from the earth (upstream), transports it (midstream) and processes it (downstream). Exploration can take place on land (onshore) or at sea (offshore).
The majority of the platforms for extracting oil and gas are located in the USA. By 2025, the company expects to produce 4.7 million barrels of oil equivalent (a unit of measure for oil and gas production), about a third of which will come from the Permian Basin in Texas. The Permian Basin is the largest shale basin in the United States, and is home to most of the known oil reserves.
ExxonMobil's upstream stations are not only located in the United States, but also in other major oil-producing countries such as Guyana. The large deposits in Guyana account for a significant portion of the Americans' daily production. In addition, there are further projects in Africa, Asia, Europe and South and North America.
Exxon thus has a very broad network of deposits and is not dependent on any one location.
Furthermore, ExxonMobil not only generates income from the sale of the oil it explores, but also processes its raw materials into various lubricants, polyethylenes and other chemicals.
ExxonMobil is the largest of the so-called Big Oil majors, the Western energy companies, in terms of market capitalisation.
Although the Saudi oil company Saudi Aramco is even larger than the Big Oil majors (market capitalisation of $1 trillion), it is almost entirely owned by the Saudi royal family.
Source: Big Oil Companies Chart Tool StocksGuide
Exxon has a market capitalisation of $475 billion and is significantly larger than the second-largest company, Chevron, which is also based in the United States.
For the big energy companies, the focus is usually less on revenue and more on earnings (net profit). ExxonMobil is no exception.
Source: 4Q24 ExxonMobil Presentation
While net income in 2023 was still $36 billion (according to GAAP), annual earnings for the last year were only $33.5 billion.
Let's go through Exxon's individual divisions and see what the reason for the decline in earnings is.
The Upstream division is Exxon's most important division. The oil and gas produced in the upstream business are also used for further processing in the other divisions.
After $21.3 billion in earnings in 2023, last year's annual profit was $25.4 billion. This division was not only able to increase its profit by 19 per cent, but also accounted for 75 per cent of total annual profit. Exxon attributes this increase to the increase in the volume produced, as well as cost savings. This was achieved despite lower prices for oil and gas.
This segment represents almost all processed oils, lubricants and other energy products derived from crude oil. A significant decline in earnings can be seen here. After the 12.1 billion net profit in 2023, only a surplus of 4 billion dollars was achieved in the past year. Exxon achieved lower prices than in the previous year, coupled with lower sales volumes. Despite this significant decline in profits, this division is the second-largest earnings segment. It accounts for around 12 per cent of annual earnings.
ExxonMobil's subsidiary ExxonMobil Chemical produces a wide range of chemicals. These are used in industry, agriculture and personal hygiene, among other things. They can also be used in healthcare or the construction industry. After $1.6 billion in annual profits in 2023, this division was able to increase its earnings by 60 per cent to $2.6 billion last year. The chemicals division was able to achieve higher prices and higher sales volumes.
The Specialty Products sector is a combination of chemical and lubricant products. This segment includes special waxes, elastomers, plastics and adhesives. The majority of the range is aimed at the automotive sector. For example, the well-known Mobil 1 motor oil is one of the specialty products. This division generated an annual profit of $2.7 billion in 2023, which increased to $3.1 billion last year. Exxon was also able to increase volume and achieve price increases in this area. The increase in profits was achieved despite higher costs.
The deal for Hess' acquisition by Chevron had actually already been signed. Chevron wanted to take Hess off the stock market for $53 billion in shares and thereby secure access to the valuable assets in Guyana. But Exxon objected to the takeover and sued for a right of first refusal on the assets in Guyana included in the deal. The verdict is expected in the third quarter of this year. In Guyana, the costs per barrel of oil produced are significantly lower than in the US, for example. This ensures very high cash flows for Exxon in this area. If Chevron wins the case, it too could benefit from the low costs in this area. Some parts of the Guyanese coast have not yet been fully explored, so the competition could also expand to include new deposits.
Although Exxon had to accept a slight decline in earnings last year, this did not occur in the all-important upstream sector, but resulted from lower sales revenues and sales volumes in the lubricants segment. The upstream business continues to run at full speed, as we saw in the increased sales volume. In addition, there is now a US president who wants to support domestic energy companies with tax breaks.
A few weeks ago, ExxonMobil reported its quarterly figures. The stock's reaction was muted. The price fell by 2.5 per cent.
Source: Quarterly Figures 2025 ExxonMobil Price Reaction
The reasons for the price decline can be found in profitability. While revenue rose by 1 per cent to $81 billion and the gross margin also increased thanks to lower production costs, net income (TTM) remained the same as in the same quarter of the previous year.
Source: ExxonMobil last quarterly figures December 2024
EBIT also increased by 6 per cent to $7.77 billion. The high increase in administrative costs is particularly striking. These costs have risen by almost 100 per cent as a result of Exxon's acquisitions, which somewhat distorts the overall picture. Management could increase profitability by reducing these costs.
Overall, the quarterly figures can be considered solid in the general environment. Despite acquisitions, operating costs have not risen significantly and profitability has been maintained.
Donald Trump's energy strategy can already be seen in ExxonMobil's revenue targets for the next few years, as estimated by analysts.
Source: ExxonMobil revenue forecast 2025 to 2029
The expected revenue in 2029 of 275 billion US dollars would be a decline of 21 per cent compared to the current year. This year, the forecast is 335 billion dollars. This would be a decline of around one per cent compared to the previous year.
The US president's call for an increase in production volumes supports this forecast. If global market demand remains the same, this would lower the oil price. A peace agreement between Ukraine and Russia could also expand supply and lower the oil price.
It remains to be seen whether ExxonMobil and the other oil majors will comply with Donald Trump's request. Trump, on the other hand, needs a falling oil price so that it can counteract the increased inflation expected as a result of tariff policy.
Despite the expected decline in sales, analysts predict a significant increase in the profit margin.
Source: ExxonMobil earnings forecast 2025 to 2029
For 2029, the average expected profit margin is 18.8 per cent. This would be an increase of almost 90 per cent compared to the net margin in 2024. The average estimates of net profit for the next few years show double-digit growth rates. How is this possible when sales are falling?
Donald Trump's policy also comes into play here. The US president wants to lower tax rates for American energy companies in return for higher subsidies. This would explain the significant increase in profit margins.
Trump's demands are clear, but have not yet been ratified. However, they are already included in analysts' estimates and thus also the significant profit increases at ExxonMobil over the next few years. The fall seems high if Trump's demands do not pass Congress.
The ExxonMobil share is currently listed as the top scorer with 12 points according to the dividend strategy. With over four decades of annual dividend increases, Exxon has already achieved the status of a dividend aristocrat.
Source: ExxonMobil stock dividend
For 41 years, the oil giant has increased its profit distribution every year. The current dividend yield is 3.55 per cent.
Source: ExxonMobil stock Dividend
The share receives 2 points for the current dividend yield and an additional 3 points in the total score for the average yield of the profit distribution over the last 10 years. This is 4.1 per cent. The Americans also score well in terms of the low dividend payout ratio, which is around 37 per cent in relation to net profit. This adds a further 3 points. The share can score another three points for the continuity of dividend payments over 10 years.
The average rate of increase in dividends over the last five years is a significant drawback. This is only 2.28 per cent. The stock would not achieve the total score of 12 points required for a place among the top scorers without this.
ExxonMobil's stock scores particularly well with its low average payout ratio of around 37 per cent over the last three years and its long history of consistent dividend payments. For the time being, the stock seems to be more interesting for investors focused on high dividend yields, as the most recent dividend increases have been small.
Let us now turn to the valuation of ExxonMobil stock.
Source: ExxonMobil Valuation ratios
The price-earnings ratio (P/E ratio) is currently 14. This does not initially appear to be much for a market leader with a broad upstream portfolio, but growth is low according to analyst estimates. The enterprise value/free cash flow ratio (EV/FCF ratio) of 16 is at a similar level to the P/E ratio.
ExxonMobil's stock does not appear cheap based on conventional valuation parameters. Large increases in profits and cash flow can only be achieved with a significant increase in the oil price, a large expansion in production volumes or, as we have already mentioned, tax breaks from US politicians. Based on all these factors, the stock appears fairly valued.
The White House has clearly stated its intention to support the American energy giants by offering tax breaks, but this is not yet a done deal and still needs to be approved by Congress.
Until then, Exxon shareholders could be kept happy with further dividend increases.
Since Chevron is the second Big Oil major from the US, a comparison is in order.
Source: ExxonMobil stock Head-to-Head Comparison with Chevron StocksGuide Charts
At first glance, the valuation of both stocks looks similar.
Chevron's P/E ratio is 16, while Exxon's is below 14. Chevron's EV/FCF ratio is also currently higher than Exxon's. Exxon's value is around 16, compared to Chevron's value of around 20. So Exxon is ahead here.
ExxonMobil's profitability also appears to be better than Chevron's. Exxon's EBIT margin is currently around 12 per cent. Chevron, on the other hand, only manages a little over 10 per cent. Chevron's free cash flow margin of 8 per cent is also lower than Exxon's 9 per cent. However, the values here are close.
By contrast, a really significant difference can be found in sales per employee. Exxon generates 5.38 million with each employee, while Chevron only achieves 4.32 million per employee.
ExxonMobil seems to be currently winning the comparison with Chevron. The valuation is a little lower. Exxon's margins are even slightly higher than Chevron's, despite the slightly lower valuation.
It should be noted that Chevron could catch up if it wins the lawsuit against Exxon and is able to take over Hess, including its valuable assets in Guyana.
Source: Chevron Hess takeover presentation
Chevron claims that, if the takeover is successful, Guyana will have the highest cash flows per oil-equivalent barrel of any asset.
Even if it loses in court, ExxonMobil should still be able to generate stable cash flows.
ExxonMobil's stock is not cheap, but the analysis also showed why this is the case.
A certain premium for the market leader among Western energy giants seems justified in view of the broadly diversified upstream portfolio. The acquisition of Pioneer Natural Resources has further increased the number of available upstream projects. However, a disadvantage can still be seen.
Source: ExxonMobil Number of outstanding shares
The acquisition was paid entirely in shares, thereby increasing the number of outstanding shares and diluting shareholders. In previous years, shares were steadily repurchased and the number has been reduced again somewhat since the takeover. However, this figure could be increased again with further possible acquisitions.
The majority of analysts currently rate ExxonMobil shares as a buy.
Source: ExxonMobil Price targets from analysts
More than 60 per cent of analysts would currently buy the stock. By contrast, a third of the experts only come up with a hold recommendation. One analyst would sell the stock.
At present, the stock does not appear to be cheap, but only fairly valued. Interested investors could set up a P/E ratio alarm at a value of 11. Then the stock could include a valuation discount and be reviewed again.
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The author and/or persons or companies associated with the StocksGuide own or may own shares in ExxonMobil. This article represents an expression of opinion and not investment advice. Please note the legal information.