It is true that the price per barrel of oil has been lackluster over the past twelve months. But this has not unduly weighed on the American supermajor's results, as it had hedged well against this scenario; ultimately, its exploration and production segment is only showing a modest decline in profitability.
Exxon is returning $38bn to shareholders in 2025, including $20bn in share buybacks - buybacks that, however, do little to reduce the number of shares outstanding, since they have merely absorbed the dilution caused by last year's acquisition of Pioneer - and $18bn in dividends.
This is more or less the same as in 2024, and in both cases more than the profit generated by the group - whether one looks at net income or free cash flow. Hence two successive large holes in cash, the first of $8bn in 2024, the second of $12bn in 2025.
Should this dynamic be a concern as the stock reaches an all-time high and market capitalisation nears the symbolic $600bn threshold? The question is worth asking, because Exxon is currently valued at peak multiples of earnings and equity, and at a low point for its dividend yield.
At the end of 2024, we noted in Exxon Mobil Corporation: Babylonian prospects that the major had committed to distribute $165bn to shareholders between 2025 and 2030 on top of its regular dividends. These commitments - which are now difficult to walk back - are potentially perilous in a sector that remains exposed to powerful cyclical shocks.
A few years ago, it was precisely this kind of scenario that triggered Boeing's plunge into the vicious spiral that then brought it to the brink of bankruptcy.
