XOM Financial Analysis

Analysis Date: 2/3/2025

Business Model

ExxonMobil's revenue model is based on the sale of Upstream (crude oil, natural gas), Energy Products (refined products), Chemical Products, and Specialty Products globally.

Revenue Sources

• Sales and other operating revenue from Upstream, Energy Products, Chemical Products, and Specialty Products.
• Income from equity affiliates.

Income Statement Analysis

• Sales and other operating revenue decreased slightly by 0.7% QoQ.
• Production and manufacturing expenses increased by 9.5% QoQ, a potential concern if this trend continues.
• Depreciation and depletion decreased by 15% QoQ, which could be a positive sign, but needs further investigation to understand the driver.
• Non-service pension and postretirement benefit expense significantly decreased by 85.7% QoQ, a positive one-time item or sustainable efficiency.
• Net income attributable to ExxonMobil decreased by 11.8% QoQ, despite slight revenue decrease, expense management needs scrutiny.

Balance Sheet Analysis

• Cash and cash equivalents decreased by 26.9% YoY, which is significant and warrants investigation, despite strong cash flow from operations.
• Notes and accounts receivable increased by 14.9% YoY, potentially indicating increased sales or slower collections.
• Inventories increased by 14.6% YoY, which might suggest buildup or increased valuation, needs further analysis in conjunction with sales data.
• Property, plant, and equipment increased significantly by 36.9% YoY, likely due to the Pioneer acquisition and capital investments, representing asset growth.
• Total Assets increased by 20.5% YoY, primarily driven by PP&E, reflecting expansion of the asset base.
• Long-term debt decreased slightly by 1.9% YoY, indicating stable long-term financial leverage.
• Total Equity increased substantially by 27.3% YoY, driven by retained earnings and likely the Pioneer acquisition stock issuance, strengthening the equity base.

Capital Allocation

ExxonMobil's capital allocation strategy prioritizes shareholder returns and disciplined investment. The company increased its annual dividend for the 42nd consecutive year and executed share repurchases of over $19 billion in 2024, planning to continue the $20 billion annual share repurchase program through 2026. Capital expenditures are planned between $27-$29 billion in 2025, supporting growth in advantaged assets and new projects. Management emphasizes investments in high-return, low-cost-of-supply projects in both traditional and new energy sectors, while maintaining financial strength and returning excess cash to shareholders.

Management Commentary

Our transformed company delivered unmatched value in 2024.

Financially, we delivered some of our highest earnings and operating cash flow in a decade.

We earned returns higher than our peers and well above our cost of capital.

We distributed more cash to shareholders than all but five companies in the entire S&P 500.

Industry refining margins and natural gas prices declined from last year's historically high levels.

Chemical margins remain bottom-of-cycle driven by Asia Pacific.

Overall Sentiment: Positive and confident. Management expresses strong confidence in the company's transformation, operational execution, and future growth prospects, particularly highlighting shareholder value creation and disciplined capital allocation, while acknowledging current market headwinds in refining and chemical margins.

Recommendation

Rating: Hold

Reason for Rating: ExxonMobil demonstrates strong financial performance and commitment to shareholder returns, underpinned by its transformed business and strategic investments. However, a slight YoY decrease in net income and significant cash balance reduction, despite strong operating cash flow, warrant a cautious approach. While long-term growth prospects are positive, current market conditions and increased capital expenditures balance out the bullish signals.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/3/2025, 5:54:46 AM