ExxonMobil (NYSE: XOM) has a bold view of its future. The energy giant wants to deliver an incremental $20 billion of earnings and $30 billion of cash flow by 2030. That plan would see it widen its already sizable lead over other oil companies.
Here's a closer look at where ExxonMobil wants to be in five years and how it plans to get there.
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Exxon's 2030 plan
ExxonMobil is taking a two-pronged approach to achieve its ambitious earnings growth plan. A core aspect of its strategy will be to invest heavily into organically growing its business. It expects its capital-spending budget will be in the range of $27 billion to $29 billion this year and $28 billion to $33 billion annually in the 2026 to 2030 time frame.
The energy company plans to focus its investment spending on its advantaged assets with lower costs and carbon emissions profiles. By 2030, Exxon expects to grow its oil and gas production to 5.4 million barrels of oil equivalent per day (BOE/d), up from 4.6 million BOE/d last year. Over 60% of that production will come from advantaged assets like the Permian, Guyana, and LNG, up from around 50% this year. Exxon also plans to invest heavily in growing its product-solutions business (i.e., refining and chemicals), with most of that investment geared toward growing high-value products by investing in advantaged projects. Exxon also plans to invest about $30 billion of its total capital into lower carbon-investment opportunities.
The other aspect of Exxon's plan is to continue pursuing additional structural cost savings. Exxon aims to slash another $7 billion in structural costs by 2030, adding to the $11 billion it has cut since 2019. It seeks to achieve these savings by simplifying business processes, optimizing supply chains, and modernizing its technology.
A growing gusher of excess cash
Exxon estimates it will invest about $140 billion into major projects and its Permian development program by 2030. That investment positions the company to grow its cash flow from operations from $55 billion last year to more than $80 billion by 2030, or about an 8% compound annual rate. That's 40% higher than the cash-flow projection of its closest peer. With its cash flow rising while its capital spending stays in a roughly $30 billion annual range, Exxon will produce an enormous amount of excess cash in the coming years. At $65 oil, Exxon would generate about $165 billion in surplus cash flow by 2030.
Given that Exxon already has an elite balance sheet, it will likely return the bulk of this surplus to shareholders. It seems like a lock that the oil giant will continue to increase its dividend. The company has raised its payout for 42 straight years, a level that only 4% of S&P 500 members have reached. It paid out $16.7 billion in dividends last year and recently boosted its per-share payment by another 4%.
Exxon will also likely continue to repurchase a sizable number of its shares each year. It repurchased $19.3 billion of its stock last year, bringing its total cash return to an industry-leading $36 billion (more than all but five companies in the S&P 500). The company currently plans to repurchase $20 billion of its stock this year and another $20 billion in 2026. It could increase that pace in the future if oil prices rise.
The best will only get better
Exxon is currently the undisputed leader in the oil patch. It delivered industry-leading earnings, cash flow from operations, and cash returns to shareholders last year. The company expects to build on that lead over the next five years by investing heavily in its advantage assets while also continuing to strip out structural costs. That strategy positions it to produce an even bigger gusher of surplus cash that it can return to investors. It makes Exxon look like a very compelling long-term investment opportunity.
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
