Numbers Do not Lie: ExxonMobil Is the High Inventory within the Oil Patch.

ExxonMobil (XOM -0.41%) is the most effective firm within the oil enterprise. That was abundantly clear from its 2023 monetary outcomes. The power behemoth delivered industry-leading monetary outcomes throughout a lot of the sector’s most necessary metrics.

The main oil inventory is in a wonderful place to proceed its dominance in 2024 and past. Here is a have a look at what’s fueling ExxonMobil’s sturdy efficiency.

Main the pack

ExxonMobil just lately reported its fourth-quarter and full-year monetary outcomes for 2023. They have been very good. The oil large recorded an oil-industry-leading $36 billion in earnings throughout 2023. It additionally generated a whopping $55 billion in money movement from operations. The corporate has now grown its earnings at an astounding 40% compound annual price from its pre-pandemic degree in 2019 whereas rising its money movement from operations at a greater than 15% compound annual price. These progress charges led its peer group, which is spectacular contemplating that Exxon is the largest of its rivals.

These weren’t the one metrics the place Exxon leads its friends:

Picture supply: ExxonMobil.

As that slide reveals, Exxon purchased again a peer-leading $17.5 billion of inventory final yr. It additionally paid a large $15 billion in dividends and just lately delivered its peer-leading forty first yr of dividend progress. Exxon has additionally delivered probably the most structural price financial savings amongst its friends since 2019 whereas producing the very best compound common shareholder return in its class.

CEO Darren Woods commented on the components fueling Exxon’s success in its fourth-quarter earnings press launch. Woods said:

Our constant technique and execution excellence throughout the enterprise delivered industry-leading earnings and enabled us to return additional cash to shareholders than our friends in 2023. These outcomes exhibit the basic enhancements we have made to our enterprise, reflecting our progress in high-grading our portfolio by way of investments in advantaged initiatives and choose divestments, whereas, on the similar time, driving a better degree of effectivity and effectiveness all through the enterprise.

As Woods notes, a key driver of Exxon’s potential to ship peer-leading efficiency is the power of its portfolio. Exxon has centered on investing in its highest-return belongings, led by the 4 progress pillars of its portfolio: the Permian, offshore Guyana, Brazil, and LNG. The corporate grew its manufacturing from Guyana and the Permian by 18% final yr, which helped gas its sturdy earnings and money movement.

Positioned to proceed thriving

Exxon continues to focus its investments on its greatest belongings, which places it in a powerful place to keep up its management within the oil patch. The corporate spent $26.3 billion on capital initiatives final yr. That was barely forward of the highest finish of its steerage vary as a result of the corporate selected to opportunistically speed up actions in its Permian and Guyana belongings, the place it earns the very best returns. Exxon expects to spend $23 billion-$25 billion on high-return capital initiatives this yr and $22 billion-$25 billion from 2025 by way of 2027.

The corporate additionally continues to make strikes that strengthen its portfolio. Final yr, it bought $4.1 billion of belongings, together with its East Texas upstream belongings within the fourth quarter. It is changing these belongings with higher ones.

The most important addition ought to come later this yr when Exxon completes its $64.5 billion acquisition of Pioneer Pure Assets. The deal will greater than double its footprint within the Permian Basin. That elevated scale will additional improve Exxon’s returns within the area. It expects to earn double-digit returns because it recovers extra sources extra effectively.

Exxon’s deal with making high-return investments and strengthening its already advantaged portfolio ought to allow it to proceed producing peer-leading earnings and money movement. That must also enable it to return masses of cash to shareholders by way of a rising dividend (Exxon just lately elevated its payout by one other 4%) and significant repurchases. That mixture of earnings progress and rising money returns ought to give Exxon the gas to supply sturdy whole returns for buyers sooner or later.

A top-tier oil inventory

Exxon made probably the most cash within the oil patch final yr. It has now delivered peer-leading earnings and money movement progress since 2019, fueled by its deal with investing in its greatest belongings. It is in a wonderful place to proceed delivering industry-leading progress, pushed by its returns-focused capital program and pending acquisition of Pioneer Pure Assets. These components make Exxon stand out as the highest inventory to purchase within the oil patch for buyers searching for to anchor their portfolio with the {industry}’s chief.