ExxonMobil (XOM) Embraces a Lower Carbon World, Investor Day Highlights - Wells Fargo
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Wells Fargo analyst Roger Read reiterated an Overweight rating and $65.00 price target on ExxonMobil (NYSE: XOM) after management provided a deeper look into its plans to navigate the company in a lower carbon-intensity world, consistent with the framework of the Paris Agreement. In the near-term (i.e., next 5-10 years) XOM’s focus and results will come from emissions reductions, eliminating flaring and biofuel expansion. Carbon capture utilization and storage (CCUS) is the new business opportunity with a potential $2.0 trillion opportunity developing over the next two decades. From a financial standpoint, $50/bbl Brent oil prices means the return to average Downstream and Chemicals margins. Management also illustrated its goals of generating freecashflow of $30bn through 2025 via asset high-grading and project startups, $6bn of opex reductions and disciplined capex investments (sub $19bn in 2021 / $20-25bn2022-2025e).
The analyst stated "We expect the majority of free cashow will be dedicated to debt reduction, especially in the first part of the 2021 to 2025 period. We have been big advocates of lower leverage across the energy sector. Reducing debt is critical, in our view,for XOM to be able to demonstrate the through cycle resiliency of its dividend."
Shares of ExxonMobil closed at $56.04 yesterday.
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