Can Disciplined Cost Management Fuel ExxonMobil's Future?

Globe and Mail

3 days ago

Exxon Mobil Corporation XOM emphasizes making its business more efficient and resilient. This is clear from its last earnings call, where it stated that since 2019, it has reduced $12.7 billion in structural costs. This means XOM is achieving the same or better results while spending less. On average, this saves about $2.5 billion annually, supporting ExxonMobil's bottom line in a volatile business environment.
ExxonMobil mentioned on its recent earnings call that it aims to slash its breakeven costs to $35 per barrel by 2027 and $30 per barrel by 2030. Thus, XOM's upstream operations, which derive the majority of earnings, will probably remain profitable even if there is a plunge in oil prices in the future. It can also be said that the integrated major stands to earn substantially more from its upstream business, reflecting its strong footprint in the most prolific Permian basin, when prices climb.
Importantly, XOM has aimed to lower its breakeven costs while maintaining its investment program. This will not only keep its operations profitable and resilient during a challenging business environment but also help it generate long-term value for shareholders while continuing to invest in major projects.
Other Upstream Firms With Low Breakeven Costs: CVX, EOG
According to Statista, a leading platform for data collection and visualization, the breakeven price in the Permian, especially in the Delaware and Midland sub-basins, is well below $40 per barrel. Hence, companies operating in the Permian, like Chevron Corporation CVX and EOG Resources Inc. EOG, are experiencing low breakeven prices.
In 2024, CVX conducted 80% of its development activities in the Delaware basin. Chevron plans to increase the development program in the Delaware basin to 85% this year. This simplifies CVX's strong focus on low breakeven-cost operations, enabling it to maximize its profit.
On its recent earnings call, EOG stated that it could easily handle all its planned spending for this year, even if oil prices trade in the low $50 per barrel. It means that to remain financially healthy, EOG does not need high oil prices.
XOM's Price Performance, Valuation & Estimates
Shares of XOM have declined 1% over the past year compared with the 2.8% fall of the composite stocks belonging to the industry.
From a valuation standpoint, XOM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 6.77X. This is above the broader industry average of 4.14X.
The Zacks Consensus Estimate for XOM's 2025 earnings hasn't been revised over the past seven days.
XOM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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Chevron Corporation (CVX): Free Stock Analysis Report
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
EOG Resources, Inc. (EOG): Free Stock Analysis Report