Is ExxonMobil's Plan for $35 Oil Breakeven Going to be a Game Changer?

Exxon Mobil Corporation XOM mentioned in its recent earnings call that it plans to lower its breakeven costs to $35 per barrel by 2027 and $30 per barrel by 2030. Now, the billion-dollar question lies with the investors: To what extent will this lower breakeven, if achieved, aid XOM?
This is a realistic question that should arise in every investor's mind since the integrated energy giant derives the lion's share of its earnings from its upstream business. The no-brainer answer is that this level of low breakeven costs will be highly beneficial for XOM's bottom line, especially from its upstream business. In other words, ExxonMobil will remain profitable even if crude oil prices drop significantly and stand to earn substantially more when prices climb.
To add to that, even during most months of 2020, when energy demand collapsed due to the COVID-19 pandemic, ExxonMobil's upstream operations could have been profitable if its breakeven costs had been $30 per barrel. Per data from the U.S. Energy Information Administration, the Cushing, OK, WTI Spot prices for March, April and May were only below the $30 per barrel mark. Thus, there is no doubt that this development, if achieved, is going to be a game changer for ExxonMobil.
According to Statista, a leading platform for data collection and visualization, the breakeven price in the Permian, especially in the Delaware and Midland sub-basins, is well below $40 per barrel. Hence, companies operating in the Permian, like Chevron Corporation CVX and EOG Resources Inc. EOG, are experiencing low breakeven prices.
In 2024, CVX conducted 80% of its development activities in the Delaware basin. Chevron plans to increase the development program in the Delaware basin to 85% this year. This simplifies CVX's strong focus on low breakeven-cost operations to maximize its profit.
In its recent earnings call, EOG said that it could easily handle all its planned spending for this year, even if oil prices trade in the low $50 per barrel. That means that to remain financially healthy, EOG does not need high oil prices.
Shares of ExxonMobil have declined 4.4% over the past year, outpacing the 6.3% fall of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, XOM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 6.45x. This is above the broader industry average of 4.05X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ExxonMobil's 2025 earnings has been revised downward over the past seven days.
Image Source: Zacks Investment Research
XOM currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Business Insider

36 minutes ago

• Business Insider

How Russia's overheating war economy could get a boost if the Iran conflict sends oil prices even higher

Oil prices spiked in the wake of the US entry into the Israel-Iran conflict, a development that could give a much-needed boost to Russia's war-weary economy. Brent crude, the international benchmark, traded around $76 on Monday, a day after the US bombed nuclear sites in Iran. That's up 14% from its price on June 12, the day Israel first targeted Iran's military leaders and nuclear program. Brent prices have climbed 26% from their low in early May. West Texas Intermediate crude traded around $74 a barrel, up 9% from the day of Israel's first attack. WTI prices are up 30% from their low last month. The price of Urals oil, Moscow's flagship crude blend, also rose to around $63 a barrel on June 13, up 8% from its price on May 1, according to data from Argus Media cited by Bloomberg. A report from The Institute for the Study of War flagged the positive knock-on effects on Russia's economy, with oil being Moscow's top export — dnd the revenue that the Kremlin brings in from its energy trade is a key lifeline for its war effort in Ukraine. Russia put its economy on a war footing after the full-scale invasion, with President Vladimir Putin making moves to boost the output of the country's defense-industrial base. Production of key weaponry, like highly destructive glide bombs, drones, and missiles, has gone up since the start of the war. Russia has also increased contract bonuses and soldier pay to expand its invasion force upwards of 600,000 troops. "Continued rising oil prices following Israeli strikes against Iran may increase Russian revenue from oil sales and improve Russia's ability to sustain its war effort, but only if the price of oil remains high and if Russian oil does not come under additional international sanctions," the thnk tank said in a report last week, before the US entered the conflict over the weekend. Armed conflict between Israel and Iran — which the US joined on Saturday — also jeopardizes the Strait of Hormuz, a highly important passage for oil shipments in the Middle East. Russia is less reliant on this key transit route. The country has pivoted to selling its oil to Asian customers after getting hit with sanctions, and has rerouted more of its oil through the Suez Canal and the Strait of Malacca, according to the Energy Information Administration. "As long as the Straight remains at risk, political appetite for additional sanctions on Russian oil will remain low," The Royal United Services Institute, an independent British research institution, wrote in a note. The jump in oil prices comes at a pivotal time for Russia's economy, which has been bearing the cost of its war against Ukraine for over three years. In May, the nation said it would pull out another $5.5 billion from its liquid reserves to balance the budget deficit, which tripled in 2025. Russia's oil and gas revenue also dropped 35% year-over-year that month. According to the nation's Finance Ministry, the liquid assets in Russia's National Wealth Fund stood at 2.8 trillion roubles, or around $35.7 billion, in May. Calculations by Bloomberg show that's down 68% since the start of the Ukraine War. Meanwhile, the Trump administration's monthslong efforts to bring Russia and Ukraine to the negotiating table for peace talks appear to be going nowhere. Kyiv has denounced Putin's terms as effectively amounting to an unacceptable capitulation.

Yahoo

an hour ago

• Yahoo

Crude Prices Erase an Early Advance as Iranian Retaliation Appears Limited

August WTI crude oil (CLQ25) today is down -0.73 (-0.99%), and August RBOB gasoline (RBQ25) is down -0.0129 (-0.56%). Crude oil and gasoline prices today gave up sharp overnight gains and turned lower on speculation that Iran's response to the US bombing of its nuclear sites is unlikely to disrupt oil supplies from the Middle East significantly. Crude prices today initially soared to a 5-1/4 month high in the initial reaction to the US strike over the weekend on Iran's nuclear facilities. 1 Nuclear Energy Stock to Buy With 21% Upside Potential in June 2025 Crude Oils Seasonal Tendency,: Slippery Slope or Bunker Buster? Palantir, Nuclear Stocks, and the Put/Call Ratio: Key Stocks, Sectors, and Indicators on Watch After U.S. Strikes on Iran Our exclusive Barchart Brief newsletter is your FREE midday guide to what's moving stocks, sectors, and investor sentiment - delivered right when you need the info most. Subscribe today! Crude prices have support due to concern that the US strikes over the weekend on Iran's nuclear facilities could lead to an escalation of the Israel-Iran conflict that could lead to disruption of Middle Eastern oil supplies. Iran vowed retaliation and kept up attacks on Israel today, while Israeli forces kept up strikes on Iranian military sites and airports. Iran's army command said the US has directly entered into war and should await "severe consequences" and that the Iranian army is "now free to take any action" against US interests. President Trump said he would respond with "far greater" force to any Iranian retaliation on US assets. So far, Iran has not tried to close the vital Strait of Hormuz, which handles about 20% of the world's daily crude shipments and also 20% of the world's LNG shipments. However, Iran's parliament on Sunday called for the closure of the strait, although that cannot happen without approval from Supreme Leader Khamenei. Energy research firm Kpler Ltd. said, "If Iran blocks the Strait of Hormuz, even for one day, oil can temporarily hit $120 to $150 a barrel, and if it attacks major oil production or export facilities in neighboring countries, it may drive up prices higher for longer." Concern about a global oil glut is negative for crude prices. On May 31, OPEC+ agreed to a 411,000 bpd crude production hike for July after raising output by the same amount for June. Saudi Arabia has signaled that additional similar-sized increases in crude output could follow, which is viewed as a strategy to reduce oil prices and punish overproducing OPEC+ members, such as Kazakhstan and Iraq. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production. OPEC+ had previously planned to restore production between January and late 2025, but now that production cut won't be fully restored until September 2026. OPEC May crude production rose +200,000 bpd to 27.54 million bpd. Gasoline prices have support from the American Automobile Association (AAA) projection that a record 61.6 million people will travel by car this Fourth of July holiday (June 28 to July 6), up 2.2% from last year and a sign of stronger gasoline demand. Oil prices continue to be undercut by tariff concerns, as President Trump recently stated that he intends to send letters to dozens of US trading partners within one to two weeks, setting unilateral tariffs ahead of the July 9 deadline that followed his 90-day pause. A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported today that crude oil stored on tankers that have been stationary for at least seven days fell by -13% w/w to 79.66 million bbl in the week ended June 20. Last Wednesday's EIA report showed that (1) US crude oil inventories as of June 13 were -10.2% below the seasonal 5-year average, (2) gasoline inventories were -1.8% below the seasonal 5-year average, and (3) distillate inventories were -16.7% below the 5-year seasonal average. US crude oil production in the week ending June 14 was unchanged w/w at 13.431 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6. Baker Hughes reported last Friday that active US oil rigs in the week ending June 20 fell by -1 to a 3-3/4 year low of 438 rigs. Over the past 2-1/2 years, the number of US oil rigs has fallen from the 5-1/4 year high of 627 rigs posted in December 2022. On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Boston Globe

an hour ago

• Boston Globe

Wall Street is betting Iran Will ‘aim lower' — for now

The most immediate concern is that Iran will disrupt the flow of Persian Gulf oil and natural gas through Advertisement About a fifth of the world's oil and liquefied natural gas passes through the narrow strait between Iran and Oman that links the gulf to the Arabian Sea. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up Most of those shipments go to Asia, but the United States would still see rapidly rising energy prices if Iran succeeded in blocking Hormuz. That could further slow an economy already battling headwinds from tariffs, cooling consumer spending, and cautious business sentiment. 'The risks of a financial crisis are rising,' Diane Swonk, chief US economist at KPMG, But the economy has proven remarkably resilient, shaking off mass layoffs during COVID, the red-hot inflation that followed, and the shock of Trump's aggressive tariffs. Investors have hung on throughout. Advertisement US stocks opened with modest gains on Monday. After an initial rise, oil futures were down about 2.5 percent on the New York Mercantile Exchange. 'It will take some time for this conflict to settle, but the market will view the worst is now in the rear-view mirror,' Wedbush analyst Dan Ives said Sunday on X. 'Expect stocks up.' Iran has three basic options for responding to the United States and Israel, James Stavridis, dean emeritus of the Fletcher School of Law and Diplomacy at Tufts University, wrote Monday in a Bloomberg op-ed column. According to Stavridis, Iran could: Abandon its nuclear ambitions and return to talks — an outcome, he said, that's highly unlikely given the regime's pride and instability. Retaliate with limited, face-saving strikes that avoid major US casualties. Hit back hard by trying to close the Strait of Hormuz, assassinate American targets in the Gulf, and launch cyberattacks to spike oil prices and sow unrest in the West. 'Of the three options, I'd say that Iran's leaders want to seize number three and go big. Yet they also recognize the high risk of such an approach and will probably aim lower: asymmetric attacks and targeted operations against US interests and citizens.' Stavridis said. Investors are betting on the 'aim lower' response — for now. The showdown with Iran complicates an already uncertain US economic outlook. The inflation news has been good after a difficult start to the year. With inflation nearing the Federal Reserve's 2 percent target, the central bank would normally be preparing to cut interest rates. But Trump's tariff war, which threatens to push prices higher, has put the central bank on hold. The Fed voted on Wednesday Advertisement The Fed's cautious stance makes sense because the economy is in good shape and the inflationary effects of Trump's tariffs remain uncertain, Susan M. Collins, president of the Boston Fed, 'I don't see an urgency to adjust rates,' said Collins, one of 12 voting members of the Fed's rate-setting committee this year. 'We do not have that sustained price stability that I'm looking for.' That stability won't be possible without resolutions to two quite different standoffs: the real Mideast war and Trump's tariff war. Larry Edelman can be reached at