Is ExxonMobil's Upstream Profit Engine Still Running Strong?

Exxon Mobil Corporation XOM, a leading global integrated energy firm, earns a significant portion of its earnings from its upstream business segment. Since oil and gas production is a major revenue driver for the company, the commodity pricing environment is crucial to its overall financial performance. With the West Texas Intermediate ("WTI") spot price below $60 per barrel, it is worth assessing whether XOM’s upstream operations can remain profitable in this pricing scenario.

The company mentioned that over 50% of its oil and gas production comes from high-return, advantaged assets, including its Guyana assets and Permian Basin resources. It is working on increasing the share of total production from these assets to almost 60% by 2030.  These advantaged assets have low breakeven costs, allowing XOM to generate sustainable profits even when oil prices are low. On its first-quarter 2025 earnings call, the company also highlighted that it plans to reduce breakeven costs to $30 per barrel by 2030. In addition, ExxonMobil continues to focus on structural cost savings, which are expected to enhance earnings resilience amid volatile pricing environments.

Therefore, with the company’s continued emphasis on reducing costs and increasing the share of total production from its high-quality, low-cost assets, its upstream business is likely to remain profitable even in a challenging pricing environment.

High-Quality Assets: The Core of COP and EOG's Competitive Edge

ConocoPhillips COP and EOG Resources, Inc. EOG are two global energy firms that can thrive even during periods of low oil prices.

ConocoPhillips’ portfolio includes assets in the prolific shale basins of the United States, the oil sands in Canada, and conventional assets in Asia, Europe and the Middle East, which support low-cost production. Notably, in the U.S. Lower 48, COP has an advantaged inventory position that can support operations at a break-even cost as low as $40 per barrel WTI. Even if crude oil prices decline significantly, ConocoPhillips will be able to maintain its financial performance and generate positive cash flows.

EOG Resources is a leading independent exploration and production company with operations focused on the prolific acres in the United States as well as several resource-rich international basins. EOG boasts a high-return, low-decline asset base and stands out among the low-cost producers in the United States. The company’s focus on maintaining a resilient balance sheet and lowering production costs should enable it to weather oil price volatility.

XOM’s Price Performance, Valuation & Estimates

Shares of ExxonMobil have plunged 7.4% over the past year compared with the 4.3% decline 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 7.17X. This is above the broader industry average of 4.40X.

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

XOM, COP and EOG currently carry a Zacks Rank #3 (Hold) each. 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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