Exxon sees big earnings boost from cost cuts, will increase share buybacks after Pioneer deal closes

Exxon Mobil said Wednesday its expects earnings to more than double through 2027 relative to 2019 as the energy giant moves forward with a slew of cost-cutting measures.

Exxon said it’s on track to grow its earnings and cash flow by $14 billion over the next four years, as the company slashes costs, grows production, and increases sales of chemicals, lower emission fuels and performance lubricants.

The oil giant plans to cut structural costs by another $6 billion through the end of 2027, delivering $15 billion in total savings compared with 2019.

The announcement comes nearly two months after Exxon agreed to buy Pioneer Natural Resources for nearly $60 billion, or $235 a share. This is Exxon’s largest deal since it bought Mobil during the late 1990s. Pioneer is the largest producer in the Midland Basin, a section of the Permian.

After the merger closes — which is expected to do so in the first half of 2024 — the oil giant plans to increase its annual share repurchase program to $20 billion in 2024 through 2025, up from $17.5 billion in 2023.

Exxon anticipates capital expenditures in the range of $23 billion to $25 billion in 2024, and $22 billion to $27 billion annually from 2025 through 2027. Those expenditures should generate average returns of 30%, with more than 90% of the spending having payback periods of less than a decade, according to the company.

“We remain committed to providing the energy and products that raise living standards around the world while building a new business to reduce emissions in hard-to-decarbonize parts of the economy,” CEO Darren Woods said in a statement. “ExxonMobil is uniquely equipped to do both, and we’re confident that both present significant opportunities for profitable growth.” 

The oil giant expects oil and gas production to be about 3.8 million oil-equivalent barrels per day in 2024, and then rise to 4.2 million bpd by 2027 driven by growth in the Permian Basin and Guyana.

Exxon is also increasing its investments in lower carbon emissions projects to $20 billion through 2027, up from $17 billion previously. The company plans to slash its own upstream greenhouse gas emissions up to 50% by 2030. The oil giant said it has already achieved half of that planned reduction.

The company is focusing on carbon capture, lithium for electric vehicle batteries, hydrogen and biofuels. Its investments in these spaces are expected to generate returns of 15%, according to the company.

Exxon is standing up a lithium drilling operation in Arkansas and expects to produce battery-grade lithium for electric vehicles as soon as 2027. The goal is to supply enough of the mineral to support the manufacture of 1 million electric vehicles by 2030.

Shares of Exxon Mobil have struggled in 2023, dropping more than 9%. The bulk of those losses has come during the fourth quarter. The stock is down 14% during that time.

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