May 10, 2022 3:49 PM ET
Exxon Mobil Corporation (XOM)COM, CVX
By: Carl Surran, SA News Editor
Exxon Mobil (NYSE:XOM) may generate $50B of free cash flow this year after capital expenditures, providing plenty of room for its $15B annual dividend and $15B of expected stock buybacks, Morgan Stanley analyst Devin McDermott estimates as he reiterates his Outperform rating and $103 price target.
Exxon (XOM) is well positioned for the coming years because it has invested heavily in its core businesses while others scaled back, McDermott says, according to Barron's; for example, it has been investing in its refining business, including projects in the Netherlands and Beaumont in Texas, when "many in the industry constrained investment" - refining margins as measured by crack spreads are now near record highs.
McDermott also notes the company is the lead operator of the vast oil field off the coast of Guyana that contains 11B boe, and for Exxon (XOM), "given the proximity of discoveries, presence of multiple target zones and large resource size, there could be opportunities to further optimize development plans over time."
The analyst favors Exxon (XOM) over Chevron (CVX), saying its ~8.5% total yield - dividends plus stock buybacks - tops its rival, also citing its greater exposure to downstream operations, notably refining.
Exxon Mobil's (XOM) success in Guyana "should underpin future production and improve cash breakeven costs significantly," RB Equity writes in a bullish analysis posted recently on Seeking Alpha.