SHEL - Head-to-Head: Exxon Mobil vs. Chevron as oil prices slide

2023-06-16 10:00:07 ET

Exxon Mobil ( NYSE: XOM ) and Chevron Corporation ( NYSE: CVX ) are two of the most prominent multinational oil and gas conglomerates on the market and both trade lower on the year as oil dropped under $70/bbl.

Head-to-Head these companies have many similarities and differences but one underlying factor that's critical to the performance of both of these stocks is the outlook and price action of crude oil ( CL1:COM ).

Falling Prices:

Currently oil prices hover near the $68.25/bbl level which is a far cry from the $123/bbl level that crude experienced this time last year. On a one-year basis, oil prices have plummeted 44.8% with a 15.4% decline being seen in 2023 alone.

Oil remains under pressure which adds constraints to companies like Exxon Mobil ( XOM ) and Chevron ( CVX ) along with many of their other industry competitors. The International Energy Agency also brought about additional information that does not bode well for the commodity, reporting that global oil demand growth is expected to slow almost to a halt within 5 years.

"The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade," IEA Executive Director Fatih Birol stated . Additionally, Goldman Sachs cut its year-end targets for both Brent and WTI . The firm slashed its Brent ( CO1:COM ) forecast to $86/bbl from $95, and its WTI crude ( CL1:COM ) outlook to $81/bbl from $89.

Performance:

While there has been some pressure on the stocks YTD, a different picture emerges when zooming out on the chart. On an overall performance basis both XOM and CVX share relatively similar returns, with a slight edge going towards Exxon Mobil over a 1-year, 3-year, and 5-year performance period.

On a year-to-date basis, Exxon Mobil ( XOM ) has noticeably outperformed Chevron ( CVX ) as XOM declined by 3.5% in 2023 and CVX is lower by 11.7% . Moreover, both stocks trade below their 100-day and 200-day moving averages with shares of Exxon ( XOM ) hovering near the $105 per share marker and Chevron ( CVX ) sitting near $157.50 per share level. However, some interesting dynamics play out when comparing their 1Y Price Performance. There is a big divergence between the returns of XOM and CVX, especially with regards to their relationship to crude:

Positive Earnings & New Relationships:

While falling oil prices have hurt both Exxon and Chevron, there have been some notable counter moves. Both XOM and CVX provided solid earnings reports shown in their latest quarterly figures that helped offset declining oil prices. XOM posted Q1 Non-GAAP EPS of $2.83 that surpassed estimates by $0.23, while CVX delivered Q1 Non-GAAP EPS of $3.55 that outdid the consensus by $0.14.

Lending additional support are the advanced talks that Exxon Mobil ( XOM ) and Chevron ( CVX ) are engaged in with Algeria on a deal that would allow the two companies to drill for the first time in the country's history .

While shares of XOM and CVX continue to fiercely compete for market share in the broader oil and gas market, see how the rivals match up head-to-head when looking at things such as ratings and what analysts are saying about the stocks.

Wall Street Ratings:

Regarding Exxon Mobil ( XOM ), Wall Street has a relatively optimistic outlook as the Street says the stock is a Buy . Of the 26 analysts surveyed over the last 90 days, eight of them say that XOM is a Strong Buy. At the same time, another four believe the stock is a Buy, while 13 view the energy company as a Hold, and one analyst says it's a Strong Sell.

Chevron ( CVX ) has a similar story through the lens of Wall Street . Of the 26 analysts surveyed over the past 90 days, eight listed CVX as a Strong Buy. Another five say the stock is a Buy, and the remaining 13 classified the oil and gas firm as a Hold.

Earlier this month RBC Capital upgraded Chevron to an outperform from a sector perform, placing it at a new $180 price target which was raised from $165. At the same time, the financial institution downgraded Exxon Mobil ( XOM ) to a sector perform from outperform, giving the stock a $125 price target.

See a visual breakdown of the Wall Street ratings:

Seeking Alpha commentary:

Seeking Alpha analyst Callum Turcan says XOM is a Strong Buy , outlining the fact "Exxon Mobil's robust cash flow generation and upstream production growth upside in Guyana and the Permian Basin support its fair value estimate of ~$122 per share."

Chevron's ( CVX ) recent acquisition of PDC Energy was also touted as a positive move according to SA analyst Daniel Jones, who says the stock is a Strong Buy . Jones added: "The acquisition is expected to bring $100 million in annual operating synergies and $400 million per year in capital expenditure efficiencies, adding about $1 billion in incremental free cash flow."

Not all are as optimistic. Keith Williams, another SA analyst, says XOM is a Sell . "The rapid exit from fossil fuels and climate-related food losses are neglected but near-term issues making investing in XOM risky,” he added. At the same time, The Value Investor says CVX is a Sell, noting " There's A Reason Warren Buffett Sold .”

Other Options:

Oil's continued struggle was not helped when the American Petroleum Institute reportedly showed a build of 1.02M barrels of oil in U.S. commercial stockpiles for the week ending June 9th. As crude remains under pressure, so do some of XOM's and CVX's competitors, though some additional divergence has been seen among the Big Oil players YTD: Shell ( SHEL ) +8.5% , TotalEnergies ( TTE ) -4.4% , BP ( BP ) +2.9% and Equinor ( EQNR ) -1.5% .

Moreover, if an investor is not completely sold on XOM, CVX, or any of its competitors they can always look towards exchange traded funds as a diversified way to gain access to energy stocks. Listed below are some of the prominent energy ETFs that have heavy weightings towards Exxon ( XOM ) and Chevron ( CVX ):

• Energy Select Sector SPDR Fund ( XLE )
• Vanguard Energy ETF ( VDE ).
• iShares U.S. Energy ETF ( IYE ).
• Fidelity MSCI Energy Index ETF ( FENY ).
• Strive U.S. Energy ETF ( DRLL ).

More on Exxon Mobil & Chevron Corporation:

• What To Expect From Exxon Mobil In 2023
• Chevron: Cash Flow Monster On Sale
• Exxon CEO tells Europe to 'let the market work' in climate approach
• Chevron starts gas production at Gorgon Stage 2 development offshore Australia

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