Exxon Mobil Corporation XOM is a leading integrated energy player. Over the past seven days, the firm, carrying a Zacks Rank #3 (Hold), has not witnessed any earnings estimate revisions for 2023 and 2024.
What's Favoring the Stock?
The price of West Texas Intermediate crude is currently hovering around the $70-per-barrel mark. The favorable trajectory in oil price is a boon for ExxonMobil’s upstream operations. In the Permian Basin – the most prolific oil and gas resource in the United States – and offshore Guyana, ExxonMobil has a solid pipeline of profitable projects.
In order to have a dominant presence in the Permian, ExxonMobil has entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources PXD. Pioneer Natural is one of the foremost oil producers operating in the Permian Basin. With the deal closure, Permian production of the integrated energy major will more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D). Furthermore, ExxonMobil projected that this production figure will rise to an impressive 2 MMBoE/D by 2027.
In Stabroek Block, located off the coast of Guyana, ExxonMobil has made many major discoveries that significantly improve its production outlook. The advantaged growth projects of Guyana have lower greenhouse gas intensity than most of the oil and gas-producing resources across the globe. Thus, in the upstream business front, it could be said that ExxonMobil’s prospects are solid.
XOM has a strong balance sheet, so it can withstand adverse business environments. XOM has a total debt-to-capitalization of 16.6%. Compared to the 24% debt-to-capitalization of composite stocks belonging to the industry, ExxonMobil is better off.
However, in terms of dividend yield, XOM has consistently lagged composite stocks belonging to the industry over the past year. Also, the energy giant’s financial position was undermined by extensive investments in low-yield projects over several years and the impact of the coronavirus pandemic.
Stocks to Consider
Better-ranked players in the energy space include Southwest Gas Holdings Inc. SWX and Weatherford International plc WFRD While Southwest Gas Holdings sports a Zacks Rank #1 (Strong Buy) at present, Weatherford International carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Southwest Gas Holdings is making progress in its transition to a pure-play natural gas leader. The company's affordable energy solutions are witnessing heightened demand from its growing customer base.
Weatherfordis a key energy player and is engaged in offering exclusive drilling technologies that will maximize clients’ reservoir exposure. It is also involved in efficient well construction and completion activities.
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