Should You Buy, Hold, or Sell ExxonMobil (XOM) Post Q2 Update?

Core Insights - Exxon Mobil Corporation (XOM) is facing challenges in its second-quarter 2024 earnings due to soft natural gas prices and diminished refining margins, which are expected to negatively impact performance [1][8] Group 1: Business Operations - ExxonMobil has strengthened its presence in the Permian Basin by acquiring Pioneer Natural Resources Company, resulting in a combined 1.4 million net acres and an estimated 16 billion barrels of oil equivalent resource [2] - The company anticipates that its production from the Permian will more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D) based on 2023 volumes, with expectations to reach 2 MMBoE/D by 2027 [2] - ExxonMobil has a robust project pipeline in offshore Guyana, which, along with its Permian operations, is expected to generate significant cash flows due to low production costs [3] Group 2: Financial Position - ExxonMobil's integrated business model provides protection against low oil prices, as it has extensive operations in refining and chemicals in addition to exploration and production [4] - The company maintains a debt-to-capitalization ratio of 15.9%, significantly lower than the industry average of 24.2%, allowing it to enhance its financial position and repay pandemic-related debt [4] - In comparison, Chevron Corporation has a debt-to-capitalization ratio of 11.9%, while BP plc has a higher ratio of 38.4% [5] Group 3: Market Expansion - ExxonMobil is entering the lithium market, crucial for electric vehicle batteries, and has signed an agreement with SK On to supply up to 100,000 metric tons of lithium from its upcoming Arkansas project [6] Group 4: Stock Performance and Outlook - Despite current challenges, ExxonMobil's long-term outlook remains promising, with a Zacks Rank of 3 (Hold) and a history of dividend payments growing at an average annual rate of 5.8% over the past 41 years [7] - Year-to-date, ExxonMobil's stock has appreciated by 12.9%, outperforming the industry average increase of 7.7% [7] - Current valuations indicate that shares are somewhat expensive, trading at a trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization of 6.15X, above the five-year median of 6.12X and the industry average of 3.95X [8]