Is the Current Oil Price Favorable for ExxonMobil's Upstream Business?

Exxon Mobil Corporation XOM earns most of its income from its upstream business. Since exploration and production activities mainly depend on oil and gas prices, the natural question is whether the crude pricing environment is favorable for XOM.

In the second quarter of 2025 earnings announcement, ExxonMobil already mentioned the Permian, the most prolific basin in the United States, and the Guyana deepwater projects as its core advantageous projects. The cost of operations is low there, as reflected in low breakeven costs. Per Statista, a global platform that provides facts and figures, the breakeven price in the existing wells in the Midland and Delaware sub-basins of the broader Permian is below $40 per barrel. Thus, with the West Texas Intermediate (WTI) crude trading at more than $63 per barrel, the upstream operations of XOM in the prolific basin are highly profitable.

In the first quarter of 2025 earnings call, ExxonMobil revealed its plan to lower its break-even costs to $30 per barrel by the end of this decade. Thus, with the integrated energy giant striving to lower its breakeven costs while making its operations more efficient, the upstream business is likely to continue to generate handsome cash flows for the company.

CVX & FANG Can Also Combat Low Oil

Like XOM,Chevron Corporation CVX and Diamondback Energy Inc FANG also have low breakeven costs to survive a period when oil turns low.

In the Permian Basin, Chevron is among the leading exploration and production players and is thus benefiting from low-cost assets. Notably, Permian production drives the upstream business to a great extent.

Diamondback Energy is also a Permian pure play stock, reflecting its low break-even costs. FANG also has a strong balance sheet.

XOM’s Price Performance, Valuation & Estimates

Shares of ExxonMobil have risen 3.5% over the past year compared with the 9.2% improvement of the composite stocks belonging to the industry.

From a valuation standpoint, XOM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.11X. This is above the broader industry average of 4.28X.

The Zacks Consensus Estimate for XOM’s 2025 earnings has not seen any revisions over the past seven days.

ExxonMobil stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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