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ExxonMobil (XOM) Revises Growth Plans With Upside Potential

Zacks Equity Research
Companies In The News Are: FB,BXG,ARQL,KURA

Exxon Mobil Corporation XOM has revised production plan and expects a boost in annual earnings potential by more than 140% by 2025 compared with 2017 adjusted earnings. The forecasts are based on the assumption of oil price of $60 per barrel and 2017 margins.

Based on adjusted earnings in 2017, ExxonMobil’s updated earnings estimate compares with last year’s anticipated increase of 135% between 2017 and 2025. Annual cash flow from operations is anticipated to reach $60 billion in 2025. On the back of further improvements in investment portfolio and divestment plans, the company has augmented cumulative earnings potential from 2019 through 2025 has augmented by about $9 billion.

Over the period from 2019 to 2025, cumulative cash flow from operations and asset sales is expected to be $24 billion, up from the projections provided at last year’s analyst meeting. This includes $15 billion from estimated asset sales from 2019 to 2021.

Also, the return on capital employed is expected to double by 2025. The upstream segment will gain from ExxonMobil’s exploration success and progress in development plans. About 1.3 billion oil-equivalent barrels were added to the resource base in 2018, which included additions from new discoveries and strategic acquisitions, mainly in Guyana and Brazil.

In Guyana, the estimated gross recoverable resource from the Stabroek Block is about 5.5 billion oil-equivalent barrels compared with the updated resource estimate of more than 5 billion oil-equivalent barrels in late 2018.

ExxonMobil has made alterations in the Permian Basin growth plans and expects to boost production by roughly 80% compared with initial estimates. The company now expects production from the Permian to increase to more than 1 million oil equivalent barrels per day by 2024 from the earlier projection of 600,000 barrels equivalent per day.

Further, appraisal of Delaware Basin’s increased resource size, infrastructure development plans as well as secured capacity to transfer oil and gas to ExxonMobil’s Gulf Coast refineries and petrochemical operations via the Wink-to-Webster, Permian Highway and Double E pipelines will contribute to the anticipated increase in production.

Some other key projects that will contribute to the company’s growth is its acreage in Brazil, the liquefied natural gas (LNG) project in Mozambique, Papua New Guinea LNG project and the Golden Pass LNG project.

In the downstream segment, ExxonMobil has six major refining investments underway to meet growing demand for higher-value fuel and lubricant products. Of these projects, a Beaumont hydrofiner, a delayed coker at Antwerp and an advanced hydrocracker at Rotterdam are operational. A Fawley hydrofiner in the U.K., light crude refining expansion at Beaumont and a residual upgrader in Singapore are progressing per schedule.

In the chemical business, ExxonMobil has outlined plans for 13 new facilities to supply growing demand for products. Seven projects were brought online through 2018 and the remaining six are on schedule. These investments are estimated to deliver 30% sales growth by 2025, primarily driven by technology-enabled performance products.

Zacks Rank & Key Picks

ExxonMobil carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector can opt for some better-ranked stocks as given below.

CrossAmerica Partners L.P. CAPL is involved in the wholesale distribution of motor fuels, comprising gasoline and diesel fuel. The company delivered average positive earnings surprise of 452.2% in the last four quarters. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SEACOR Holdings, Inc CKH is a diversified holding company mainly focused on domestic and international transportation, logistics and risk management consultancy. The bottom line for 2019 is expected to increase 38.4% year over year. The company delivered average positive earnings surprise of 12.6% in the trailing four quarters. The stock currently sports a Zacks Rank #1.

San Antonio, TX-based NuStar Energy L.P. NS is a midstream energy company. For 2019, the bottom line, which has witnessed two upside revision in the past 30 days, is expected to grow 63.9% year over year. The company currently holds a Zacks Rank #2 (Buy).

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