Skip to Content
Stock Analyst Update

Exxon Mobil Trims Spending and Defends Dividend

The company is not planning on pivoting from its core oil and gas business.

Mentioned:

Exxon Mobil (XOM) held its annual analyst day and as is typical, it held little new news, in large part because most strategic guidance items, including a reduction in long-term spending, were updated previously. But also, because Exxon did not announce a pivot away from its core oil and gas business as many peers have. While this might leave activist investors disappointed, we think it’s the right move and should lead to near-term outperformance, if not longer. Our fair value estimate and narrow moat rating are unchanged, leaving Exxon as our Best Idea in the sector.

The updated plans include capital spending of $16 billion-19 billion this year and $20 billion-25 billion through 2025. Volumes will hold steady at 3.7 million barrels of oil equivalent per day, instead of growing to 5 mmboe/d as its previous plan called for. Exxon, however, can still grow earnings meaningfully (to about $25 billion annually by 2025), albeit not to its prior target (doubling 2017 earnings to about $30 billion annually). This is despite the lower spending due to the contribution of structural cost reductions, portfolio improvements and if downstream and chemical margins return to previous highs, assuming $55/bbl Brent. Exxon already reduced structural costs by $3 billion last year and plans to cut another $3 billion or more by 2023. Although volumes won’t grow, overall portfolio profitability should improve thanks largely to high-margin Guyana volumes backfilling those lost to a 50% decline in North American dry gas production and lower-value divestments.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Allen Good does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.