The West Texas Intermediate (WTI) crude oil price is approaching the significant benchmark of $75 per barrel, a substantial increase from $60.79 noted on May 30. This rise is largely attributed to the mounting tensions between Iran and Israel, positively impacting Exxon Mobil Corporation’s exploration and production (E&P) activities. Given that ExxonMobil derives approximately 88% of its earnings from upstream operations, this increase in oil prices is a favorable development for the company’s bottom line.
ExxonMobil has a strong presence in the oil-rich Permian Basin, which remains one of the most productive regions in the United States. The current high oil prices are expected to generate substantial cash flows for Exxon, reinforcing its E&P business. Recently, the company completed its acquisition of Pioneer Natural Resources, enhancing its operations in the Permian, with expected cost synergies revised upward from $2 billion to $3 billion over the next decade.
Chevron Corporation and BP plc are also poised to benefit from the higher oil prices, as both companies significantly rely on their upstream operations. Chevron operates over 1.8 million net acres in the Permian region, where low breakeven costs enable it to capitalize on rising crude prices. Similarly, BP maintains a solid upstream framework with competitive production costs, positioning it effectively to harness the advantages of the current oil pricing environment.
In terms of stock performance, ExxonMobil shares have increased by 7.9% over the past year, outpacing the industry’s 3.7% gain. Currently, Exxon trades at a trailing enterprise value to EBITDA ratio of 7.06, above the broader industry average of 4.26. The Zacks Consensus Estimate for Exxon’s earnings for 2025 remains unchanged.
Given these developments in the energy sector, there appears to be a positive outlook for major oil companies as they navigate the fluctuating oil market conditions. The current climate could provide them a significant opportunity to improve their financial standings.