The energy industry is in a transitional period. While fossil fuels are crucial to the economy these days, lower-carbon energy will be vital in the future. No one knows how quickly this transition will occur, which is creating considerable uncertainty.
ExxonMobil(NYSE: XOM) is building its business to thrive in the energy transition. The energy company is investing heavily to provide the world with more low-cost oil and gas in the near term, while also preparing for a lower-carbon future. ExxonMobil has a clear plan to grow shareholder value through 2030 and beyond, making it an energy stock that you can confidently buy and hold for the long term.
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ExxonMobil recently raised its financial guidance for 2030. The oil giant now expects to deliver $25 billion in earnings growth and $35 billion in cash flow growth by 2030 compared to 2024’s level, assuming constant margins and commodity prices. That’s up from its prior outlook of $20 billion and $30 billion, respectively. Exxon projects to deliver an average annual earnings growth rate of around 13% and double-digit cash flow growth. The company can grow even faster on a per-share basis due to its ongoing share repurchase program.
A core aspect of Exxon’s strategy is to invest heavily in its advantaged assets (lowest-cost and highest margin). By 2030, production from its advantaged upstream assets (Permian, Guyana, and LNG) should reach 65% of its total production. Exxon also expects to deliver $9 billion of incremental earnings from its downstream products solutions platform by investing in competitively advantaged projects, deploying proprietary technology, and achieving structural cost savings. High-value products, including new businesses such as Proxxima systems and carbon materials, should contribute more than 40% of the growth potential from its product solutions segment by 2030. Finally, Exxon is in the early stages of building several lower-carbon energy businesses, including carbon capture and storage (CCS). It’s building the world’s first large-scale, end-to-end CCS system along the U.S. Gulf Coast and advancing integrated CCS-enabled low-carbon data center projects.
Exxon’s disciplined investment strategy has it on track to produce $145 billion of cumulative surplus cash at $65 oil by 2030. That will give it the funds to continue increasing its dividend, which it has done for 43 straight years. The oil giant also plans to repurchase stock, targeting $20 billion of repurchases in 2026.
Exxon’s investments over the next several years will lay the foundation for continued growth beyond 2030. The company has the upstream resources to continue growing its production to support future fossil fuel demand. Exxon can continue developing its extensive resources in the Permian Basin. It has the largest and highest quality inventory position in the industry, providing it with a growth runway well into the 2030s. Additionally, it expects to deliver new LNG project start-ups in Papua New Guinea and Mozambique in the coming decade.
Meanwhile, Exxon sees tremendous growth potential in expanding its product solutions platform over the next decade. New businesses, including technology-driven Proxxima systems and carbon materials, have the potential to add $13 billion of incremental earnings by 2040.
Exxon also sees tremendous potential and optionality from lower-carbon solutions. It’s pursuing approximately $20 billion in lower-carbon investment opportunities through 2030, with 60% of these investments aimed at helping third-party customers reduce their emissions. In addition to CCS, it’s investing in hydrogen, lithium, and other lower-carbon solutions. While some of these businesses will require the development of supportive government policy and broader market formation, they provide Exxon with a very long runway of profitable growth in the coming decades.
ExxonMobil has significant visibility into its growth through 2030. A combination of investing in its advantaged upstream assets and expanding its product solutions business should fuel $25 billion of incremental earnings and $35 billion of additional cash flow over the next few years. Meanwhile, the energy company has plenty of fuel to continue growing beyond 2030, especially as it expands its lower-carbon energy platforms. This combination of visible growth and optionality makes Exxon an energy stock that you can confidently buy and hold for the long term.
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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.
