What ExxonMobil actually does
ExxonMobil is the largest US-based oil and gas company. It was formed in 1999 through the merger of Exxon and Mobil, and its history goes back to John D. Rockefeller’s Standard Oil. It is headquartered in Spring, Texas, near Houston.
The business is vertically integrated, meaning it covers the whole chain:
- Upstream. Finding and producing oil and natural gas, including in the Permian Basin and offshore Guyana.
- Downstream. Refining crude oil into fuels and selling them.
- Chemicals. Making plastics, synthetic rubber and other industrial materials.
How the business makes money
Profit depends heavily on oil and gas prices, which swing with global supply and demand. When prices are high, upstream profits surge. When prices fall, the refining and chemicals businesses cushion part of the damage, which is why being integrated reduces volatility compared with pure producers.
ExxonMobil also focuses on keeping costs low, because it cannot control the price of what it sells.
The dividend story
ExxonMobil has raised its dividend every year for more than four decades, which places it among the Dividend Aristocrats. It pays quarterly and has kept raising even through the sharp oil price crash of 2020, although the raises were small.
The yield is usually above the market average. As with any commodity company, it is wise to check the payout against free cash flow, since earnings can fluctuate widely.
What to keep an eye on
- Commodity prices. Oil and gas are outside the company’s control.
- Energy transition. Long-term demand for fossil fuels is an open question.
- Capital spending and acquisitions. Big projects and takeovers bring execution risk.
- Geopolitics and regulation. Operations span many countries.
Quick take
ExxonMobil is a cash-generating energy giant with a long dividend record. It offers more yield than most large-cap companies, but also more sensitivity to the oil cycle.