ExxonMobil(NYSE:XOM) is already the undisputed leader among international oil companies. The oil giant delivered industry-leading profits, cash flow and shareholder returns in the third quarter. It owes its leadership to its privileged resource portfolio, which includes several world-class assets that generate high margins.
The oil company believes his best days lie ahead. It recently unveiled its new business plan Unpleasant 2030, which would see it deliver significant incremental revenue and cash flow in the coming years.
Exxon expects an increase of $20 billion in revenues and $30 billion in cash flow by 2030. That implies the oil giant will grow its profits by 10% annually, while increasing its cash flow by around 8% annually. That’s a very healthy growth rate for a company of Exxon’s enormous size.
The company is not counting on higher oil and gas prices to strengthen its plan. It expects Brent oil, the global benchmark price, to be around $65 per barrel by 2030 (Brent is currently in the mid-$70s). Meanwhile, it expects natural gas prices to reach roughly $3 per MMBtu (million British thermal units) in the US and $6.50 per MMBtu globally. (While U.S. gas prices have been around $2 per MMBtu this year, international gas prices are above $10.)
Instead, Exxon expects that a combination of investments in its preferred assets, operational excellence and disciplined cost and capital management will drive earnings and cash flow growth.
The core of Exxon’s strategy is to continue investing heavily to develop and expand its best assets. The company expects capital expenditures to be between $27 billion and $29 billion in 2025. The company expects capital expenditures to increase to a range of 28 to 33 billion dollars annually in the period 2026 to 2030.
Exxon expects to deploy approximately $140 billion through 2030 on major capital projects and its Permian Basin development program. The company expects this investment to deliver strong returns of over 30%.
In addition to the Permian, Exxon expects to continue investing heavily in two other preferred upstream assets: Guyana and LNG. The company has four world-class LNG projects under development that will add 40 million tons of annual LNG production by 2030. Meanwhile, the company expects to complete eight projects in Guyana by 2030, that will grow that region’s gross production to 1.3 million barrels per day.
General, Exxon expects its upstream activities to produce an average of 5.4 million euros barrels of oil equivalent (BOE) per day in 2030. That is an increase from almost 4.6 million BOE/d in the third quarter of this year. The company expects that by 2030, more than 60% of its production will come from high-margin assets.
Investing heavily in the upstream business unit is only part of Exxon’s strategy. The energy giant also expects to invest capital in growing its product solutions businesses (chemicals and refining) and its low-carbon solutions platform. The company believes it can grow product solutions revenues by an additional $8 billion by 2030 by investing in several projects to expand capacity to produce high-value products such as thermoset resin, advanced coke and renewable diesel.
Meanwhile, it plans to invest up to $30 billion in low-emissions capabilities between 2025 and 2030. This includes projects to reduce the carbon footprint and help external customers lower their emissions profile. It mainly focuses on three possibilities: carbon capture and storage, hydrogenAnd lithium.
Finally, Exxon plans to continue leveraging its growing scale to drive down costs. The company expects to catch more than $3 billion in annual synergies from the acquisition of Pioneer Natural Resources. That’s an increase of more than 50% over initial expectations. In addition, Exxon plans to realize an additional $7 billion in structural cost savings by simplifying its business processes, optimizing its supply chains and modernizing its technology.
Exxon plans to invest heavily in growing its best assets in the coming years. The company expects that strategy will growing profits by about 10% each year, while adding about $30 billion to annual cash flows. That will give Exxon plenty of cash to return to shareholders through a growing dividend and a meaningful share buyback plan. Add it all up, and Exxon seems to have the fuel to be a great long-term investment.
Consider the following before buying shares in ExxonMobil:
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
ExxonMobil’s bold plan will see it generate an additional $30 billion in annual cash flow by 2030, originally published by The Motley Fool
