What You Need To Know
Exxon Mobil Corp. (NYSE: XOM) is making significant strides in expanding its operations and influence in the energy sector. The company has announced a plan to increase share buybacks, signaling a strong financial position. This move comes in the wake of Exxon's ambitious $60 billion acquisition of Pioneer Natural Resources Co., a strategic step that will enhance its crude production in the US Permian Basin.
In a clear demonstration of its commitment to growth, Exxon plans to repurchase $20 billion of its stock next year. This decision underscores the company's confidence in its future prospects. Additionally, Exxon is setting aside a substantial budget of $23 to $25 billion for capital projects next year. This investment will not only consolidate its dominance in North America's most prolific oilfield, the Permian Basin, but also enable the exploration of new reserves in international regions like Guyana. This planned expenditure aligns closely with its 2023 budget, reflecting a steady approach to growth.
Exxon's CEO, Darren Woods, is focusing on a dual strategy of investing in traditional fossil fuels and exploring low-carbon projects. His vision is to position Exxon as a leader in the energy transition. Woods, marking a historical moment, shared insights at the UN's premier climate conference, highlighting the ongoing relevance of fossil fuels and the pivotal role of the oil industry in transitioning to cleaner energy.
Furthermore, Exxon's stock showed a positive uptick in pre-market US trading. This financial maneuvering positions Exxon distinctively compared to its competitor, Chevron Corp., which is also increasing its buybacks but faces growth challenges.
Lastly, the acquisition of Pioneer Natural Resources will significantly boost Exxon's production capacity, particularly in the Permian Basin. This, combined with developments in Guyana and investments in new technologies like carbon capture and hydrogen, illustrates Exxon's comprehensive approach to securing a leading position in both traditional and emerging energy markets. Exxon is also embarking on a significant lithium production project in southwest Arkansas.
Why This Is Important for Retail Investors
Enhanced Portfolio Value: Exxon Mobil's plan to repurchase $20 billion in stock next year is a strong indicator of its financial health and confidence in its future growth. Stock buybacks often lead to a rise in share prices, as the reduced number of shares in circulation can increase earnings per share.
Stable Investment with Growth Potential: Exxon's significant investment in expanding operations, particularly in the Permian Basin, indicates a potential for long-term growth. For retail investors, this presents an opportunity to invest in a company that is not only stable but also has a clear growth trajectory, especially with the strategic acquisition of Pioneer Natural Resources.
Diversification in Energy Sources: Exxon's focus on both fossil fuels and low-carbon projects offers a diversified approach to energy production. This diversification can be beneficial for retail investors, as it spreads risk and opens up potential gains from different sectors within the energy industry, including emerging areas like carbon capture and hydrogen.
Global Expansion and New Markets: Exxon's expansion into new regions, like Guyana, and investments in international projects, like the petrochemical plant in China, signal its commitment to global growth. Retail investors can benefit from Exxon's international presence, which offers a hedge against regional market volatilities and access to emerging markets with high growth potential.
Leadership in Energy Transition: As the energy sector evolves, Exxon's involvement in the transition to cleaner energy sources positions it as a potential leader in this space. Retail investors might find Exxon's strategy appealing as it aligns with global trends towards sustainability, potentially opening up new avenues for growth and profitability in the green energy sector.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Value Investing
Exxon's significant stock buybacks and stable growth prospects might indicate that its stock is undervalued. Value investors could consider this an opportunity to acquire shares of a company that has robust fundamentals but may be undervalued by the market, especially considering its long-term growth plans and recent acquisitions.
Value investing searches for undervalued companies that trade for less than their intrinsic values, with the expectation that they will eventually be recognized by the market.
Growth Investing
The expansion into the Permian Basin and the acquisition of Pioneer Natural Resources suggest potential for substantial growth. Investors seeking companies with strong growth prospects might view Exxon as an attractive option, given its aggressive expansion plans and investment in new territories and technologies.
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
Momentum Investing
The announcement of increased share buybacks and expansion plans could create positive momentum for Exxon's stock. Momentum investors, who look for stocks with upward price trends, might find Exxon's recent strategic moves and the potential for stock price increase an appealing opportunity.
Momentum investing rides the wave of existing market trends by buying assets that have shown an upward price trend and selling those in a downtrend.
Dividend Investing
Exxon Mobil, known for its steady dividend payouts, can be a viable option for dividend investors. The company's financial strength and commitment to returning value to shareholders through buybacks and dividends make it an attractive choice for those focused on income-generating investments.
Dividend investing targets companies that regularly distribute a portion of their earnings to shareholders as dividends.
ESG (Environmental, Social, and Governance) Investing
With its investments in low-carbon projects and focus on the energy transition, Exxon is positioning itself in the evolving energy landscape. Investors interested in companies that are adapting to and investing in cleaner energy solutions might consider Exxon as a part of their ESG-focused portfolio.
Read What Others Are Saying
Bloomberg: Exxon Boosts Buybacks 14% as Hunt for More Oil Accelerates
Reuters: Indonesia says Exxon Mobil plans to invest up to $15 bln in the country
CNBC: Exxon Mobil CEO urges COP28 to focus on reducing emissions — not phasing out fossil fuels
FT: UN climate talks have focused on renewable energy for too long says Exxon chief
What you should read next:
Popular ETFs
Some investors prefer to invest in stocks via an exchange-traded fund for ease and reduced risk. Some popular ETFs include the following:
Large-Caps: Vanguard Mega Cap ETF (MGC)
Mid-Caps: Vanguard Mid-Cap ETF (VO)
Small-Caps: Vanguard Small-Cap ETF (VB)
Value: iShares Core S&P US Value ETF (IUSV)
Emerging Markets: Vanguard FTSE Emerging Markets ETF (VWO)
Developed Markets: Vanguard FTSE Developed Markets ETF (VEA)
Commodities: iShares S&P GSCI Commodity Indexed Trust (GSG)
Energy: Energy Select Sector SPDR Fund (XLE)
Clean Energy: Invesco Winderhill Clean Energy ETF (PBW)