Strongest Q2 Production Yet: Continue to Hold ExxonMobil Stock

Globe and Mail

a day ago

Last Friday, Exxon Mobil Corporation XOM announced second-quarter 2025 earnings that surpassed expectations. This was fueled by the highest second-quarter production since Exxon and Mobil merged over 25 years ago, thanks to XOM's presence in high-return assets like Permian and offshore Guyana, also contributing to a strong business outlook.
Before analyzing the factors driving this positive outlook, let's first review the second-quarter results.
XOM's Q2 Earnings Snapshot
ExxonMobil reported earnings per share of $1.64 (excluding identified items), which beat the Zacks Consensus Estimate of $1.49. The bottom line declined from the year-ago level of $2.14.
Total quarterly revenues of $81.5 billion missed the Zacks Consensus Estimate of $82.8 billion. The top line declined from the year-ago figure of $93.06 billion.
Chevron Corporation CVX and BP plc BP are two other prominent integrated energy companies. While CVX has already posted results, BP will report tomorrow.
Two Highly Profitable Upstream Assets of ExxonMobil
ExxonMobil has a strong presence in offshore Guyana resources and the Permian, the most productive basin in the United States.
The integrated energy company announced that it discovered a massive amount of oil—nearly 11 billion barrels—off the coast of Guyana. To put it simply, this is the largest oil discovery anywhere in the world in the last 15 years. In the region, there are three active projects currently for XOM, combinedly producing at a rate of roughly 650,000 barrels per day. XOM expects a total of eight projects in the region to be online by 2030, which will produce a combined 1.7 million barrels of oil equivalent per day (MMBoE/D).
In the Permian, the energy giant is employing advanced technology to get much more oil out of each well, thereby improving oil recovery. From the most prolific basin, XOM is expecting to produce 2.3 MMBoE/D by the end of this decade, suggesting a surge from the current 1.6 MMBoE/D.
XOM Revises Pioneer Acquisition Synergy Estimates Upward
With a strong focus on strengthening its presence in the Permian, ExxonMobil completed the acquisition of Pioneer Natural Resources Company on May 3, 2024. With 1.4 million net acres of the combined company in the Delaware and Midland basins, having an estimated 16 billion barrels of oil equivalent resource, ExxonMobil has greatly transformed its upstream portfolio.
The Pioneer Natural acquisition's average annual synergy, which XOM earlier estimated at roughly $2 billion over 10 years, has now been revised upward to more than $3 billion annually. The integrated giant now believes the average number could be even more.
How the Diversified Energy Majors CVX, BP Fared in Q2
Chevron reported adjusted second-quarter earnings per share of $1.77, beating the Zacks Consensus Estimate of $1.70. The outperformance stemmed from higher-than-expected production in the company's key upstream segment.
However, the bottom line came well below the year-ago adjusted profit of $2.55 due to weaker oil price realizations.
CVX generated revenue of $44.8 billion. The sales figure missed the Zacks Consensus Estimate of $47.1 billion and decreased 12.4% year over year.
The Zacks Consensus Estimate for BP's earnings is pegged at 68 cents per share, suggesting a year-over-year decline of 32%.
Should Investors Bet on XOM Stock Right Away?
Despite the positive developments, ExxonMobil has gained only a modest 3.8% year to date, possibly due to intensifying trade tensions, which have made the overall market uncertain.
Notably, ExxonMobil admits it's still unsure whether projects like blue hydrogen (a cleaner fuel) and lithium (used in EV batteries) will generate enough profit to be worthwhile. While these are promising long-term opportunities, their high risk and uncertainty may weigh on the stock price.
YTD Price Chart
Coming to the valuation story, the stock is trading at a 7.12x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is at a premium compared with the broader industry average of 4.31x.
Thus, considering the uncertainty and expensive valuations, it might not be the right time to bet on the stock. Those who have already invested may retain XOM, which 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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