ExxonMobil(NYSE: XOM) is already the undisputed leader among international oil companies. The oil giant delivered industry-leading earnings, cash flow, and shareholder returns during the third quarter. It owes its leadership to its advantaged resource portfolio, which features several world-class assets that generate high margins.
The oil company believes its best days lie ahead. It recently unveiled its new corporate plan to 2030, which would see it deliver significant incremental earnings and cash flow in the coming years.
Exxon expects to deliver an incremental $20 billion in earnings and $30 billion in cash flow by 2030. That implies the oil giant will grow its earnings at a 10% annual rate while its cash flow rises at around an 8% compound annual pace. That’s a very healthy growth rate for a company of Exxon’s massive size.
The company isn’t banking on higher oil and gas prices to fuel its plan. It expects Brent oil, the global benchmark price, to be around $65 a barrel by 2030 (Brent is currently in the mid-$70s). Meanwhile, it foresees natural gas prices to be roughly $3 per MMBtu (metric million British thermal units) in the U.S. and $6.50 per MMBtu globally. (While U.S. gas prices have been in the $2 per MMBtu range this year, international gas prices have been over $10.)
Instead, Exxon expects a combination of investing in its advantaged assets, operational excellence, and disciplined cost and capital management to drive its earnings and cash-flow growth.
The core of Exxon’s strategy is to continue investing heavily to develop and expand its best assets. The company expects capital spending to be between $27 billion and $29 billion in 2025. It sees its capital spending rising to a range of $28 billion to $33 billion annually in the 2026 to 2030 time frame.
Exxon expects to deploy about $140 billion into major capital projects and its Permian Basin development program through 2030. The company anticipates this investment will generate strong returns of more than 30%.
In addition to the Permian, Exxon expects to continue investing heavily in two other advantaged upstream assets: Guyana and LNG. The company has four world-class LNG projects under development that will add 40 million tons of annual LNG production by 2030. Meanwhile, it expects to complete eight developments in Guyana by 2030, which will grow that region’s gross production to 1.3 million barrels per day.
Overall, Exxon expects its upstream business to produce an average of 5.4 million barrels of oil equivalent (BOE) per day by 2030. That’s up from nearly 4.6 million BOE/d in the third quarter of this year. The company expects more than 60% of its production to come from its high-margin advantaged assets by 2030.
Investing heavily in its upstream business unit is only part of Exxon’s strategy. The energy giant also expects to invest capital into growing its product-solutions businesses (chemicals and refining) and low-carbon solutions platform. The company believes it can grow its product-solutions earnings by an additional $8 billion by 2030 by investing in several projects to expand its capacity to produce high-value products like thermoset resin, advanced coke, and renewable diesel.
Meanwhile, it plans to invest up to $30 billion into low emissions opportunities between 2025 and 2030. That includes projects to reduce its carbon footprint and help third-party customers cut their emissions profile. It’s primarily focused on three opportunities: carbon capture and storage, hydrogen, and lithium.
Finally, Exxon plans to continue leveraging its growing scale to reduce costs. The company expects to capture more than $3 billion in annual synergies from its Pioneer Natural Resources acquisition. That’s an over 50% increase from its initial expectations. On top of that, Exxon plans to capture an additional $7 billion in structural cost savings by simplifying its business processes, optimizing its supply chains, and modernizing its technology.
Exxon plans to invest heavily into growing its best assets over the next several years. The company expects that strategy will grow its earnings by around 10% each year while adding about $30 billion to its annual cash flows. That will give Exxon plenty of cash to return to shareholders via a growing dividend and meaningful share-repurchase plan. Add it all up, and Exxon appears to have the fuel to be a terrific long-term investment.
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
