How Exxon Mobil's Integrated Strengths Offset Crude Price Weakness

Exxon Mobil Corporation XOM, a U.S.-based oil and gas giant, continues to sail through volatility in crude prices by relying on its integrated business model and balance sheet strength. However, the company relies on its upstream segment for a significant part of its earnings. Therefore, it might be worth assessing whether the current oil price environment is beneficial for XOM.

The recent geopolitical development concerning Venezuela may result in incremental barrels flowing into the oil and gas market, further weighing down on the oil price. At present, oil prices are trailing close to the $60 per barrel mark, significantly lower than the previous year. However, Exxon Mobil has stated that even though the country sits on significant oil reserves, its energy infrastructure has been crippled over the years. The company believes that significant changes to the legal and commercial frameworks are necessary to revive Venezuela’s oil and gas industry. Hence, XOM is unlikely to be affected by further supply-demand imbalance.

Furthermore, Exxon Mobil’s integrated business model allows it to capitalize on the softness in crude prices through its refining operations. Lower crude prices imply cheaper feedstock for the company’s refineries, which supports refining gains. Additionally, XOM has low exposure to debt capital, which reduces its financial risk. The company is capable of withstanding a tough business environment by relying on its strong balance sheet.

CVX and BP: Two Leading Integrated Energy Majors

Chevron Corporation CVX and BP plc BP are two other global integrated energy firms. Both CVX and BP are involved in the upstream and downstream segments of the oil and gas business, which allows them to stabilize earnings and sustain profitability even in challenging commodity pricing environments.

XOM’s Price Performance, Valuation & Estimates

Shares of Exxon Mobil have risen 20.1% over the past year compared with the 14.5% gain 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 8.64X. This is above the broader industry average of 5.40X.

The Zacks Consensus Estimate for XOM’s 2025 earnings has seen upward revisions over the past 30 days.

XOM 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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