Update shared on15 Oct 2024
Exxon’s Low-Cost Assets Continue to Deliver
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ExxonMobil reported record production from the Permian and Guyana operations, leading to a 15% increase in total net production. Upstream assets and the integration of Pioneer Natural Resources contributed to an 11% YoY increase in revenue, and a 15.8% increase in operating income.
The oil price averaged around $80 during Q2, which was a few dollars above Q1. During Q3 the price has been closer to $74, so it’s likely to weigh on revenue for the quarter. I expected more volatility and tighter supply, but it seems that decreased demand due to weaker economic conditions has kept it subdued for now.
As I originally expected, share buybacks have been utilized heavily, and were the primary driver of EPS growth. Exxon returned a massive $9.5 billion (vs $9.2 billion in net income for the quarter) to shareholders during the quarter via dividends and buybacks. That’s probably supported the share price which is now trading at 16x earnings vs my projection of 14x.
Exxon also expanded its carbon capture and storage program with industrial customers to 5.5 million metric tons a year in committed storage. The company has also just secured the largest offshore carbon storage site in the US. I don’t see this as a revenue driver in the near term, but it may evolve into one later.
Overall the company continues to execute on its strategy of improving margins which is the basis for my narrative. I’ve rebased my starting revenue to June 2024, but will be maintaining my other 5-year assumptions like revenue growth, margins, and future PE.
Disclaimer
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