Is ExxonMobil's Premium Price Justified on Permian & Guyana Presence?

Exxon Mobil Corporation XOM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.36X, which is above the broader industry average of 4.33X. Notably, Chevron Corporation CVX and BP plc BP, two other integrated energy players, currently trade at a trailing 12-month EV/EBITDA of 7.16X and 3.26X, respectively.

It seems that investors are willing to pay a premium price for XOM, but is it justified now? Before getting into the investment conclusions, let’s analyze the energy giant’s fundamentals and overall business environment.

Offshore Guyana & Permian: XOM’s Strong Upstream Presence

ExxonMobil generates the majority of its earnings from upstream operations. In offshore Guyana, XOM has discovered huge oil resources. In the latest earnings call, the integrated major mentioned that it has produced 650,000 barrels per day from the resources, with more projects coming online. XOM expected that by the end of this decade, it would be able to produce daily volumes of a massive 1.7 million oil equivalent barrels.

In the Permian, the most prolific basin in the United States, XOM also has a strong presence. In the basin, ExxonMobil is producing massive volumes of oil, with the company expecting production to surge to 2.3 million oil equivalent barrels per day by the end of this decade.

XOM’s Project Startup & Cost Savings Target

XOM mentioned in the second quarter of 2025 earnings call that from its project start-ups in 2025, it is expecting to generate a profit of $3 billion, with the assumption that prices and margins will be constant. The earnings call also revealed that, overall, from all its operations, the integrated company is expecting to produce an incremental $20 billion in earnings by 2030 compared to 2024.

Although the next projects are adding to expenses, XOM is focusing strongly on reducing costs. The company expects a cost savings of $18 billion by 2030 compared to 2019.

Time to Bet on XOM Stock Now?

ExxonMobil also has lower debt capital exposure and hence can rely on its strong balance sheet when the business environment turns unfavorable. This is reflected in XOM’s debt-to-capitalization of 12.6%, well below the industry’s 22.9% and lower than other integrated players like CVX’s 16.7% and BP’s 43%.

Despite the positive developments, the stock gained only 3.7% in the past year, underperforming the industry’s 8.3% increase. XOM also underperformed Chevron’s 15.8% improvement and BP’s 12.8% jump.

One-Year Price Chart

One of the concerns that could probably hurt the stock price of XOM is its significant dependence on Permian, which has potential decline rates.

Hence, investors shouldn’t bet on the stock right away. However, those who are already invested can stick to their investment in the stock, currently carrying 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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