ExxonMobil vs. EPD: Which Energy Stock Boasts Better Prospects?

In the energy space, Exxon Mobil Corporation XOM and Enterprise Products Partners LP EPD are two giants. Over the past year, XOM has rallied 24.4%, outperforming EPD’s 5.2% gain. Is ExxonMobil a better stock? Let us find out.

Price is not the only parameter to underline the attractiveness of any stock, although it reflects investors’ preferences in every business phase. Hence, before coming to investment conclusions, we need to analyze the fundamentals and overall business environment of both stocks.

Soft Oil to Hurt ExxonMobil’s Upstream Business

According to data from OilPrice.com, the price of West Texas Intermediate (WTI) crude is hovering around $60 per barrel, down significantly from the year-ago level. This is hurting the upstream business of integrated energy players like ExxonMobil.

Notably, the U.S. Energy Information Administration projects the spot average West Texas Intermediate price for 2026 at $52.21 per barrel, lower than $65.40 for 2025. With XOM generating a king's size of its earnings from upstream operations, can it combat the prevailing softness in oil prices?

The advantageous assets where XOM is operating include the Permian, the most prolific basin in the United States, and offshore Guyana resources. Although the assets have cost advantages, it can be said that lower oil prices are likely to hurt the integrated energy giant’s bottom line.

Enterprise Products’ Business Model Is Not Vulnerable to Low Oil Prices

Unlike most energy players, Enterprise Products Partners’ business is not highly vulnerable to fluctuations in commodity prices.

This is because Enterprise Products Partners is a leading midstream player, and therefore, it has a resilient business model. EPD has a pipeline network that spans more than 50,000 miles, transporting oil, natural gas, refined products and other commodities. Thus, the partnership generates stable fee-based revenues from the midstream assets, irrespective of the volatility in commodity prices, as the assets are booked by shippers for a long term.

Due to the resilience of its business model, the partnership has been able to return capital to unitholders on an ongoing basis. Since its IPO, Enterprise Products has returned billions to unitholders through both repurchases and distributions.

EPD vs. XOM: Which Stock to Bet On?

The soft oil price expected this year will hurt exploration and production activities of XOM, although the energy major can lean on its strong balance sheet to sail through the relatively unfavorable business environment. Notably, XOM’s debt-to-capitalization of 13.6% is significantly lower than the industry’s 29.2%.

Considering the valuation snapshot, it has become evident that investors are now willing to pay a premium for EPD over XOM, as they are probably preferring a stable midstream business model over upstream operations, especially in the soft oil pricing scenario. The overvaluation is reflected in the fact that Enterprise Products trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.69X, above XOM’s 8.64X.

Thus, investors willing to avoid soft crude and already invested in EPD can continue to hold the stock, currently carrying a Zacks Rank #3 (Hold). On the contrary, investors who like taking risks can continue to stay invested in XOM, which also has a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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