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Oil Giants Exxon (NYSE:XOM), Chevron Seek Growth in the Americas
Stock Analysis & Ideas

Oil Giants Exxon (NYSE:XOM), Chevron Seek Growth in the Americas

Story Highlights

Energy giants Exxon and Chevron are focusing on more profitable assets in the Americas while reducing exposure to expensive, time-consuming international projects.

Integrated oil and gas behemoths Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) are cutting down on international projects to focus on more profitable assets in the Americas. These companies have been streamlining their operations to improve profitability and enhance shareholder returns. The increased focus on the assets closer to home could be due to several reasons, including geopolitical tensions, windfall tax in certain countries, higher profitability, and growing pressure from the Biden administration to boost production.

Exxon, Chevron Trim International Exposure

Last month, Exxon announced that over 70% of its upstream investments from 2023 to 2027 would be directed toward strategic developments in the U.S. Permian Basin, Guyana, Brazil, and global liquefied natural gas projects. The company expects its earnings growth over the next five years to be mainly driven by “advantaged, low cost-per-barrel assets” in Guyana, the Permian Basin, and Brazil.

Exxon projects its production to increase by 500,000 oil-equivalent barrels per day (OEBD) to about 4.2 million OEBD by 2027. This target includes gross production of over 850,000 barrels per day in Guyana (up more than 130% from current levels) and net production of more than 800,000 OEBD in the Permian (up about 45% from current levels).

Exxon has divested several international assets over recent years. In December 2022, the company announced that it completed the sale of its upstream and midstream asset portfolio in South Africa’s Chad and Cameroon. The company also exited Russia last year due to the ongoing war. Additionally, it has sold or entered agreements to sell assets in Egypt, Iraq, and Nigeria.

Coming to Chevron, the company’s $11.5 billion upstream capital expenditure (excludes $1.9 billion affiliate upstream capex) for 2023 includes $4 billion investments for Permian Basin development and about $2 billion for other shale and tight assets. Furthermore, over 20% of upstream capex is meant for projects in the Gulf of Mexico.  

Meanwhile, in the past five years, Chevron has sold assets in certain international markets, including the U.K., Denmark, Azerbaijan, and Brazil. The Biden administration recently granted the company a new license to drill oil in Venezuela following years of sanctions.

As per the Wall Street Journal, Truist Securities analyst Neal Dingmann feels that the days of managing multiple international projects are running out. “You have investors leaning on you harder than they have in the past,” stated Dingmann. “It’s going to be critical that they prune their other [noncore] businesses.”

Is Exxon a Buy, Sell, or Hold?

Wall Street is cautiously optimistic about Exxon Mobil stock, with a Moderate Buy consensus rating based on nine Buys and six Holds. The average XOM stock price target of $119.73 implies 12.4% upside potential. Shares have rallied nearly 68% over the past year due to elevated energy prices triggered by the Russia-Ukraine war.   

What is the Target Price for Chevron Stock?

The Street’s Moderate Buy consensus rating for Chevron is based on six Buys, six Holds, and two Sells. The average CVX stock price prediction of $189.43 suggests nearly 9% upside potential. Shares have jumped about 46% over the past 52 weeks.

Conclusion

Exxon and Chevron are focusing on developing assets in the Americas and avoiding expensive, multi-year international projects. These energy giants are specifically allocating billions of dollars for developing projects in the Permian Basin.

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