Exxon’s steady spending has widened gap with Chevron that could grow – WSJ (NYSE:XOM)

Exxon Mobil (NYSE:XOM) closed nearly 3% lower on Friday after missing Wall Street expectations for Q1 earnings due to a larger than forecast drop in natural gas prices and weaker oil refining margins from higher than expected maintenance costs.

But Exxon’s (XOM) shares are still up 17% YTD, outpacing the increase in Brent crude prices as well as the gains enjoyed by its competitors by a substantial margin; its market value now dwarfs closest rival Chevron (CVX) by more than $160B.

Exxon’s (XOM) consistent consistent capital spending since 2019 appears to be paying off, says Jinjoo Lee of The Wall Street Journal‘s Heard On The Street column: Exxon’s $94B in capex during 2019-23 was two-thirds more than Chevron (CVX) spent over that time, and its execution in Guyana and the Permian Basin looks better than that of Chevron, which has suffered delays and cost overruns on its Kazakhstan joint venture project.

Lee says Exxon (XOM) could widen its advantage if it wins in the challenge against Chevron’s (CVX) acquisition of Hess’ stake in the Guyana oil project; arbitration proceedings are still in “very early days,” and both companies have chosen arbitrators, with a third yet to be appointed, CFO Kathy Mikells said Friday.

With $33.3B of cash on its balance sheet, Exxon (XOM) still has the option to increase cash returns or pursue more acquisitions, and its net debt-to-capital ratio is at 3%, the lowest in more than a decade.

Exxon’s (XOM) valuation premium exceeds Chevron (CVX) by ~6% as a multiple of forward 12-month EBITDA, and Lee thinks “good news on arbitration could supercharge Exxon’s lead over its rival.”