Exxon in Guyana 5 year forecast Low $135 to High $189

Previous mistake rectified.

So as pointed out in the comments, Chevron won the Hess bid (rather than Exxon) and took a large portion of the Stabroek block. I assumed that Exxon and China National Offshore Oil Corporation (CNOOC) who had a contract with Hess and a right to exercise that and take Hess' share would be awarded that segment of the block, I was wrong.

So my projections were over inflated in terms of production share and so on (thanks for letting me know). However by using a different valuation model I've come up with a broader price range, both to the downside and the upside, although the base case (which I feel was my original price) has dropped from $189 to $174. Not a crushing blow, and considering that Mr Market is a schizophrenic it could no doubt fall either side.

So I've attempted to correct that error, if you see any other faux pas please feel free to point them out ... you're helping me too!

This analysis evaluates ExxonMobil’s stock performance, focusing on its Guyana operations in the Stabroek Block, under assumptions of 7.5% annual inflation and a stable $85 per barrel oil price (Brent crude equivalent). I account for ExxonMobil’s 45% ownership in the Stabroek Block, with Chevron (30%) and CNOOC (25%) holding the remaining 55%. A 5-year share price projection follows, based on these factors and broader market dynamics.

Key Assumptions

• Oil Price: $85 per barrel (constant in nominal terms, adjusted for inflation below).
• Inflation: 7.5% annually, impacting costs, revenues, and valuation metrics.
• Stabroek Block Ownership: ExxonMobil (45%), Chevron (30%), CNOOC (25%).
• Production Growth: Based on ExxonMobil’s guidance and industry projections for Guyana.
• Market Conditions: Stable global demand, no major geopolitical disruptions, and continued OPEC+ output management.
• ExxonMobil’s Operations: Guyana is a key growth driver, but Permian Basin, refining, and chemicals also contribute significantly.
• Capital Structure: ExxonMobil maintains its share buyback program ($20 billion annually) and dividend policy.

Guyana Operations: Stabroek Block Overview

The Stabroek Block is one of the world’s most lucrative oil discoveries, with an estimated 11 billion barrels of recoverable oil and gas equivalent. ExxonMobil operates the block and holds a 45% stake, making it the largest beneficiary of its low-cost, high-margin production.

Production Profile

• Current Production (Q1 2025): Approximately 668,000 barrels per day (kb/d), with ExxonMobil’s share at 300,600 kb/d (45%).
• 2026 Projections:
  • Yellowtail (250,000 kb/d) is fully online by mid-2025.
  • Uaru (250,000 kb/d) starts by late 2026.
  • Total block production is estimated at 1.1–1.3 million kb/d by end-2026, with ExxonMobil’s share at 495,000–585,000 kb/d.
• 2030 Projections: Total production could reach 1.7 million kb/d, with ExxonMobil’s share at approximately 765,000 kb/d.

Cost and Profitability

• Break-even Price: Stabroek’s production costs are below $30 per barrel, among the lowest globally, ensuring strong profitability at $85 oil.
• Profit Margins: At $85 oil, assuming $30 production cost (including taxes and royalties), the gross margin per barrel is ~$55. ExxonMobil’s 45% share translates to ~$24.75 per barrel in profit before overhead and other costs.
• Inflation Impact: With 7.5% inflation, production costs rise to ~$37 per barrel by 2030 ($30 × 1.075⁵). Oil price in real terms declines to ~$61.50 per barrel in 2025 dollars ($85 ÷ 1.075⁵), reducing real margins to ~$24.50 per barrel. However, nominal margins remain attractive due to high production volumes.

Revenue Contribution

• 2026 Estimate: Assuming 540,000 kb/d (midpoint of 495,000–585,000) and $55 nominal margin per barrel, ExxonMobil’s annual gross profit from Guyana is ~$10.8 billion (540,000 × $55 × 365).
• 2030 Estimate: At 765,000 kb/d and $55 nominal margin (adjusted for inflation in costs), gross profit rises to ~$15.3 billion annually.
• Guyana’s contribution to ExxonMobil’s total upstream earnings (estimated at $25–30 billion annually in 2025) is significant, potentially accounting for 35–50% by 2030.

Strategic Importance

• Low-Carbon Intensity: Stabroek’s oil has a lower emissions profile, aligning with ExxonMobil’s emission reduction goals.
• Partnership Dynamics: Chevron’s 30% stake (via Hess acquisition) and CNOOC’s 25% ensure cost-sharing, reducing ExxonMobil’s capital expenditure burden. The 2025 arbitration ruling confirmed Chevron’s stake, stabilizing the joint operating agreement.
• Government Relations: Guyana’s government receives ~50% of profits via royalties and taxes, supporting stable operations despite historical contract criticism.

ExxonMobil Financial Overview

ExxonMobil is an integrated oil and gas major with operations in upstream (exploration and production), downstream (refining), chemicals, and low-carbon solutions. Guyana is a cornerstone of its upstream growth strategy.Recent Performance (2024–2025)

• Revenue (2024): $340.57 billion, up 1.16% year-over-year.
• Net Income (2024): $33.68 billion, down 6.47% year-over-year due to lower oil prices.
• Q1 2025 Upstream Earnings: $6.76 billion, driven by Guyana and Permian production growth.
• Capital Spending (2025 Guidance): $27–29 billion, with significant allocation to Guyana and Permian.
• Shareholder Returns: $4.3 billion in dividends and $4.8 billion in buybacks in Q1 2025, on track for $20 billion annual buybacks.
• Debt: Manageable, with a strong balance sheet supporting growth investments.

Inflation Impact

• Costs: Operating and capital costs rise by 7.5% annually, increasing from ~$27 billion in 2025 to ~$39 billion by 2030 (nominal terms).
• Revenues: Nominal oil price ($85) is constant, but real revenue per barrel declines, partially offset by volume growth in Guyana.
• Earnings Pressure: Inflation erodes real margins, but ExxonMobil’s low-cost assets (Guyana, Permian) mitigate this impact.

Stock Valuation Metrics

• Current Price (July 2025): ~$112, based on analyst data and market trends.
• P/E Ratio (Trailing): ~10.5 (based on $33.68 billion earnings and ~$450 billion market cap in 2024).
• Dividend Yield: ~3.5% ($3.80 per share annually), attractive for income investors.
• Analyst Consensus: “Buy” rating with a 12-month price target of $124.40, implying 11.26% upside.

Valuation Assumptions

• Forward P/E: Assumed at 11, reflecting energy sector averages and ExxonMobil’s growth profile.
• Earnings Growth: Driven by Guyana production ramp-up, offsetting inflation and stable oil prices.
• Buyback Impact: $20 billion annual buybacks reduce shares outstanding by ~2–3% per year, boosting EPS.
• Dividend Growth: Assumed to grow at 5% annually, below inflation to preserve capital for growth.

5-Year Share Price Projection (2025–2030)

The projection estimates ExxonMobil’s share price in 2030, factoring in Guyana’s contribution, inflation, and broader operations. I've use a discounted cash flow approach, focusing on earnings growth and P/E multiple.

Step 1: Earnings Growth

• 2025 Baseline EPS: ~$8.50 (based on $33.68 billion net income and ~4 billion shares outstanding, adjusted for Q1 2025 trends).
• Guyana Contribution: Adds ~$2.50 EPS in 2026 (assuming $10.8 billion gross profit, ~70% net margin after taxes/overhead, divided by 3.8 billion shares post-buybacks) and ~$4 EPS by 2030 ($15.3 billion gross profit).
• Other Operations: Permian, refining, and chemicals maintain stable contributions, with real earnings declining slightly due to inflation but offset by cost efficiencies.
• EPS Growth Rate:
  • 2026: ~$10.50 (Guyana ramp-up, buybacks).
  • 2027: ~$11.50 (Yellowtail, Uaru fully online).
  • 2028: ~$12.50.
  • 2029: ~$13.50.
  • 2030: ~$14.50 (Guyana at 765,000 kb/d, stable other segments).
• Nominal EPS (2030): $14.50, reflecting ~11% annualized growth from 2025, driven by Guyana and buybacks.

Step 2: Inflation Adjustment

• Real EPS (2030): Nominal EPS of $14.50 in 2030 is ~$10.50 in 2025 dollars ($14.50 ÷ 1.075⁵).
• P/E Multiple: Assumed to expand to 12 by 2030, reflecting Guyana’s transformative impact and sector optimism, up from 11 in 2025.
• Real Share Price (2025 Dollars): $10.50 × 12 = $126.
• Nominal Share Price (2030): $126 × 1.075⁵ = ~$174.

Step 3: Sensitivity Analysis

• Bull Case:
  • Oil price rises to $100 (nominal), Guyana exceeds 1.7 million kb/d, P/E expands to 13.
  • Nominal EPS (2030): ~$16.50; Share price: ~$223 ($16.50 × 13 × 1.075⁵).
• Bear Case:
  • Oil price falls to $70, Guyana production delayed, P/E contracts to 10.
  • Nominal EPS (2030): ~$12; Share price: ~$139 ($12 × 10 × 1.075⁵).
• Base Case: As above, $174 nominal share price.

Step 4: Analyst Alignment

• Analyst 12-month target of $124.40 aligns with short-term optimism but doesn’t fully capture Guyana’s 2030 potential.
• Social media chatter suggests a 5-year range of $135–$189, consistent with my base case.

Risks

1. Oil Price Volatility: A sustained drop below $70 per barrel could erode margins, though Guyana’s low break-even mitigates this.
2. Inflation Pressure: Higher-than-expected inflation (e.g., 10%) could increase costs faster than revenues.
3. Regulatory Risks: Guyana’s government may renegotiate contracts, increasing royalties/taxes.
4. Energy Transition: Accelerated shift to renewables could depress long-term oil demand, though Guyana’s low-cost profile remains competitive.
5. Operational Delays: Project delays (e.g., Uaru) could defer production growth.
6. Market Sentiment: Energy stocks may face P/E compression if ESG concerns dominate.

Conclusion

ExxonMobil’s 45% stake in the Stabroek Block positions it as a leader in one of the world’s most profitable oil projects, driving significant earnings growth despite 7.5% inflation and a stable $85 oil price. Guyana’s low-cost production, combined with Chevron and CNOOC’s cost-sharing, enhances ExxonMobil’s resilience. The company’s broader portfolio, buyback program, and dividend policy further support shareholder value.

5-Year Share Price Projection (2030):

• Base Case: ~$174 (55% upside from $112).
• Bull Case: ~$223 (99% upside).
• Bear Case: ~$139 (24% upside).

Investors should monitor oil prices, Guyana production timelines, and inflation trends. ExxonMobil’s strong balance sheet and strategic focus on low-cost assets make it a compelling long-term investment, particularly for those bullish on oil demand through 2030.

I still intend to use Exxon as an off ramp from the precious metals market (once the boom has provided profits worth taking), and Guyana is still enough to move the dial on perhaps the largest multi-national on the planet. Added to that they have the highest organic replacement rate of the super majors at 80% in 2024, not including reserves purchased.

Also I consider ExxonMobil an "Autopilot" company, where I could put my money and not look at the stock price for 5 years yet still sleep well at night!

Agricola