Exxon Raises Capital Spending as Worldwide Oil Glut Looms

As the global oil market braces for a potential glut, Exxon Mobil Corporation (XOM) has announced plans to increase its capital spending, signaling a strategic shift towards lower-carbon opportunities. The energy giant, known for its robust management and enduring business model, is positioning itself to navigate the evolving energy landscape while maintaining its status as a best-of-breed company.

Exxon's increased capital spending comes amidst a backdrop of rising interest rates, which have led to a decline in tech stocks. Companies like Salesforce (CRM), ServiceNow (NOW), Apple (AAPL), Facebook (FB), and Amazon (AMZN) have all experienced a pullback in their stock prices. However, the author suggests a shift in focus towards energy stocks and industrials, which are expected to benefit from the current economic environment.

The author advises maintaining a balanced portfolio, combining growth and value stocks, to effectively navigate the market. They emphasize the importance of not hastily selling strong, enduring companies like Amazon and Apple during market downturns. These companies have proven management teams and the capability to manage challenges effectively.

While the author remains confident in companies like Apple, Salesforce, and Amazon, they express concerns about Facebook. The social media giant has faced advertiser pushback and content management issues, as evidenced by its pause on a kids' site and critical views from Salesforce CEO Marc Benioff. The author suggests that Facebook needs to establish an internal system for content arbitration to address these challenges and maintain its status as a best-of-breed company.

Exxon's increased capital spending aligns with its strategic focus on lower-carbon opportunities. The company plans to invest up to $30 billion in low-emission projects between 2025 and 2030, with almost 65% spent on reducing emissions for third-party customers. This includes developing the world's first large-scale carbon capture and storage system, a high-capacity CO2 pipeline network, and a low-carbon hydrogen facility in Baytown.

Exxon's increased capital spending in the Permian Basin and Guyana is also a strategic move to secure long-term growth and profitability. By 2030, the company aims to double Permian Basin production to approximately 2.3 million oil-equivalent barrels per day (Moebd), driven by its technology advantage and increased capital efficiency. In Guyana, Exxon plans to bring the total number of developments to eight by 2030, with gross production growing to 1.3 million barrels per day.

The author concludes by reaffirming confidence in companies like Apple, Salesforce, and Amazon due to their proven management and ability to adapt. However, they remain cautious about Facebook, suggesting that it needs to take more decisive actions to maintain its status as a best-of-breed company. The author mentions personal investment holdings in the discussed companies and offers a service for investment alerts.