XOM & PXD - Riding the waves (and a bunch of cycle thoughts)

Can the combo hit 5 million boe/d of production?

It would be a groundbreaking achievement. The last time the pro-forma combination was above 5 mil. boe was 1982 and they were producing the last couple of barrels out of ARAMCO.

But the 70% liquids/oil target seems to be within reach.

It’s not barrels that matter but rather profits and especially profits vs. the S&P 500, the benchmark most holders of XOM are measured against.

During the 2000s China cycle, their production never sustainably surpassed 4.5 mil boe but their profits and relative performance beat the market by well over 4x (3% to 12% on the right axis)

That is why Lee Raymond is in the HoF of oil executives.

You have to go back to the Standard Oil days to find a time when XOM last outperformed the market on such a magnitude.

At the time it was John D. Archibold who was leading the charge, not Rockefeller or Flagler. Rockefeller moved on to golf and philanthropy and Flagler was building out Florida real estate. From what I hear Mr Raymond is a bit of a golfer as well. I would like to meet and possibly hit the links with him one day.

Why has XOM stock lagged its profit performance since early 2022 - The market has been stuck in the “Doubt” phase.

Not just XOM, everyone’s chart looks like this. That was the point of my 4Q23 chart pack - “Transitioning from Doubt to Optimism” (HERE).

We can sit here and look at pro-forma synergies, accretiveness, yada-yada but mergers are always judged in retrospect.

From my vantage point, this seems to be a well-timed combination if you are in the secular oil bull camp.

XOM couldn’t buy anyone at the bottom of the cycle. They had too much debt as evidenced by the chart below.