2. Exxon Mobil Corp. (NYSE:XOM)
Forward P/E Ratio as of March 6: 13.46
Number of Hedge Fund Holders: 104
Exxon Mobil Corp. (NYSE:XOM) is a global energy and petrochemical company that explores, produces, and refines crude oil and natural gas. It also manufactures and markets energy, chemical, and specialty products under the iconic Exxon, Esso, and Mobil brands, while pursuing lower-emission technologies.
The company’s Upstream segment involves the exploration and production of crude oil and natural gas. In 2024, it achieved record production from advantaged assets and the highest liquid production in over 40 years. This was driven by strength in the Permian and Guyana. In the Permian, combined production from Exxon Mobil Corp. (NYSE:XOM) and Pioneer assets will reach 2.3 million barrels per day by 2030, which is up from 1.5 million in 2024. Guyana production reached 650,000 barrels per day in just 10 years, and tripled local GDP per capita since 2020.
In 2025, projects like Yellowtail in Guyana and advanced Permian recovery techniques will be implemented. These focus on low-cost, low-emission and high-return growth. Yellowtail is the company’s fourth and largest deepwater oil development project in Guyana, for increasing production capacity. Advanced Permian recovery techniques refer to improved methods used by Exxon Mobil Corp. (NYSE:XOM) in the Permian Basin to extract more oil and gas.
Madison Dividend Income Fund views Exxon Mobil positively due to its strategic assets, efficient operations, planned production growth, and strong shareholder return policy, even with moderate oil prices. Here’s what it stated 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)