3. Exxon Mobil Corp. (NYSE:XOM)
Forward P/E Ratio as of March 14: 13.61
Number of Hedge Fund Holders: 104
Exxon Mobil Corp. (NYSE:XOM) is a global energy company that explores, produces, refines, and markets crude oil, natural gas, petrochemicals, and specialty products. It operates through Upstream, Energy Products, Chemical Products, and Specialty Products segments, and is also pursuing lower-emission technologies.
The company’s Upstream segment explores and produces oil and gas and achieved record production in 2024 due to the strong performance in the Permian Basin and Guyana. Permian production is projected to reach 2.3 million barrels per day by 2030, which will be up from 1.5 million in 2024. In 2025, the company will implement projects like Yellowtail in Guyana and advanced Permian recovery techniques, and focus on low-cost, low-emission, and high-return growth. Yellowtail is Guyana’s largest deepwater oil project, and advanced techniques boost Permian Basin oil and gas extraction.
Guyana, which is enriched by Exxon Mobil Corp.’s (NYSE:XOM) oil discoveries, is pursuing a gas partnership with Suriname to build an industrial hub. Guyana President aims to diversify the economy with gas-powered industries and regional energy security. Exxon Mobil Corp. (NYSE:XOM) is exploring gas development options, and stands to benefit from increased production and potential new infrastructure development in the region.
Madison Dividend Income Fund favors Exxon Mobil Corp. (NYSE:XOM) because of its strategic assets, efficient operations, planned production growth, and strong shareholder return policy. Here’s what it stated regarding the company in its first quarter 2024 investor letter:
“This quarter we are highlighting Exxon Mobil Corporation (NYSE:XOM) as a relative yield example in the Energy sector. XOM is a leading integrated oil and natural gas company. It has upstream assets that develop and produce oil and natural gas, along with downstream refining and chemical manufacturing assets. We believe it has attractive low-cost acreage in the Permian basin and has a sizeable growth opportunity in Guyana. Further, we think XOM has a sustainable competitive advantage due to size and scale, and its ability to integrate refining and chemical assets provides a low-cost advantage versus competitors.
Our thesis on XOM is that it will grow production volumes of oil and gas moderately over the next few years, while limiting excessive capital investment that plagued the industry from 2014-2020. Production growth will come from its 2023 acquisition of Pioneer Natural Resources, which is the largest producer in the Permian basin. XOM plans to double its Permian output by 2027, to 2 million barrels per day. Capital spending will be limited to $20-25 billion per year through 2027, which should allow for significant amounts of cash to be returned to shareholders including a $35 billion share repurchase program and continued dividend increases. Higher oil prices would provide a tailwind to our thesis but are not necessary. We think XOM can grow earnings and cash flow if oil prices remain above $60 per barrel…” (Click here to read the full text)
