2024-02-15 00:27:26 ET
Summary
- Exxon Mobil reported strong Q4 and 2023 performance with FY23 earnings of $36bn and operating cash at $55bn at ~40% and ~15% respective CAGRs vs. 2019 baseline.
- Despite margins coming down from recent heights on lower oil prices and refining margins, capital efficiency continues to significantly exceed pre-2019 regression levels and peers.
- Following a 91% FCF payout ratio in FY23, management announced a further $40bn in buybacks through YE25, potentially eliminating any dilutive effects from the Pioneer deal by 2026.
- Incorporating Pioneer's contribution and merger synergies in my valuation, I raise my price target for the consolidated entity by 15% to $158, implying a ~56% upside to current levels.
I began coverage of Exxon Mobil Corp ( XOM ) in October 2023, highlighting it as my favorite play in the international oil patch given its superior execution and management along with a favorable geographic footprint vs. peers. Following the company's announcement to take over Permian E&P Pioneer Resources ( PXD ) in late November, I published a further note, commenting and offering my thoughts on what I deem to be a perfect strategic fit to XOM's mid-term strategy of shifting its portfolio towards higher security and shorter cycle domestic US-produced barrels. In this note, I will provide an update on key themes presented in those initial notes and update my valuation to incorporate Pioneer's contribution with the acquisition expected to close in Q2 2024....
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Exxon Mobil: Raising Price Target On Strong 2023 And Pioneer Deal