Advantaged Assets And Lower Carbon Solutions Will Transform Long Term Earnings Power

Catalysts

About Exxon Mobil

Exxon Mobil is a global energy and chemical company involved in oil and gas production, refining, chemicals and lower carbon solutions.

What are the underlying business or industry changes driving this perspective?

• Shift toward lower cost, higher return production as advantaged assets in Guyana, the Permian and LNG move toward roughly 65% of total output by 2030. This can influence revenue resilience and unit earnings across future cycles.
• Large scale project execution capability, with 10 key 2025 projects started up at up to 20% lower cost and 20% faster than industry averages, supports capital efficiency that can feed into return on capital employed and net margins over time.
• Company wide emissions intensity reductions, progress in carbon capture and an end to flaring intensity targets ahead of 2030 are aligning the portfolio with long term decarbonization efforts. This can support project access, product demand and potentially protect earnings in more carbon conscious markets.
• Growth of new technology led product lines such as Proxxima materials and advanced battery anode graphite, where early performance data show efficiency gains and extended battery life, can open additional revenue streams and support mix driven margin improvement.
• Enterprise wide data and ERP overhaul, including a single global data construct and heavy use of automation and AI, is already tied to structural cost savings that exceed peers and is intended to free staff for higher value work. This can affect both operating costs and earnings power.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on Exxon Mobil compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Exxon Mobil's revenue will grow by 7.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.9% today to 12.4% in 3 years time.
• The bullish analysts expect earnings to reach $49.6 billion (and earnings per share of $12.79) by about April 2029, up from $28.8 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $32.0 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.1x on those 2029 earnings, down from 23.2x today. This future PE is greater than the current PE for the US Oil and Gas industry at 15.7x.
• The bullish analysts expect the number of shares outstanding to decline by 3.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.98%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Guyana is a central growth engine, yet part of the Stabroek block is under force majeure due to a border dispute with Venezuela and depends on an International Court of Justice ruling and future country conditions. Any long delay or unfavorable outcome could constrain production growth and reduce expected contribution to revenue and earnings.
• The business model leans heavily on advantaged assets like the Permian and LNG and on technology such as lightweight proppant and more than 40 stackable technologies. If these techniques do not scale as expected or recovery improvements fall short, future production could be lower than management ambition and weigh on revenue and earnings power.
• Management is reshaping the portfolio by divesting assets that no longer compete internally, with around US$25b sold since 2019. If sale prices disappoint or replacement projects do not generate comparable returns, the shift toward a more concentrated asset base could pressure long run cash flow resilience and net margins.
• The company is investing heavily in new areas such as lithium, advanced battery anode graphite, Proxxima materials and large scale carbon capture and storage. If these technologies prove higher cost than expected, face weaker than anticipated customer uptake or run into regulatory or permitting hurdles, the payoff from this spending could be limited and weigh on future margins and earnings.
• The enterprise wide migration to a single ERP and data platform with a large reduction in profit and cost centers and extensive automation and AI creates execution and cyber risk. Any prolonged implementation issues, control failures or disruption to operations and reporting could increase operating costs in the near to medium term and temporarily depress earnings and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Exxon Mobil is $195.0, which represents up to two standard deviations above the consensus price target of $160.17. This valuation is based on what can be assumed as the expectations of Exxon Mobil's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $195.0, and the most bearish reporting a price target of just $123.0.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $399.5 billion, earnings will come to $49.6 billion, and it would be trading on a PE ratio of 18.1x, assuming you use a discount rate of 7.0%.
• Given the current share price of $160.69, the analyst price target of $195.0 is 17.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.