Skip to Content
Stock Strategist

ExxonMobil Breaks From the Pack

Its plan to increase capital spending sets it apart from integrated peers.

Mentioned:

Breaking with integrated peers that have committed to restraining capital spending and increasing cash returns to shareholders,  ExxonMobil (XOM) plans to ramp up capital spending from $24 billion this year to $28 billion in 2019 and $30 billion on average through 2025, with the goal of doubling earnings and cash flow from 2017 levels by 2025 and delivering a return on capital employed of 15% compared with 7% in 2017. While investors have been clamoring for greater capital discipline from integrated oils, Exxon’s view is that it holds a host of high-return projects that can leverage its superior integrated model and thus warrant investment.

This reasoning is sound, in our opinion. We have long argued, supported by historical returns, that Exxon is the highest-quality integrated overall and that its downstream and chemical segments are key differentiators, so it stands to reason that the company should invest to maximize those advantages. Integrated oils have a spotty record of delivering on long-dated volume and return targets, and execution risk is high. That said, Exxon is one of the better operators and developers in the world, and its plan includes a high portion of operated projects, increasing the chances for success, in our opinion. Also, while oil prices are likely to be volatile during the next seven years, Exxon can cover its spending requirements and dividends at $40 a barrel, ensuring their safety.

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.