XOM vs. BP: Which Integrated Energy Stock Boasts Better Prospects?

In the competitive energy landscape, Exxon Mobil Corporation XOM and BP plc BP stand out not just for massive oil and gas operations but for their diverse strategies and financial transparency. As both integrated energy players are navigating a complex energy transition, investors are increasingly scrutinizing how well each balances traditional upstream business with emerging low-carbon activities. Now, the billion-dollar question is: Which energy giant is better placed?XOM’s Upstream Story Financially More Detailed Than BPWith a strong focus on strengthening its presence in the Permian, ExxonMobil completed the acquisition of Pioneer Natural Resources Company on May 3, 2024. With 1.4 million net acres of the combined company in the Delaware and Midland basins, and an estimated 16 billion barrels of oil equivalent resources, ExxonMobil has greatly transformed its upstream portfolio.The Pioneer Natural acquisition's average annual synergy, which XOM earlier estimated at roughly $2 billion over 10 years, has now been revised upward to more than $3 billion annually.Like its Permian operations, ExxonMobil boasts a robust project pipeline in offshore Guyana resources. Notably, Guyana operations have achieved a production rate of 650,000 barrels per day within just 10 years of the initial oil discovery.In the first-quarter 2025 transcript, XOM mentioned its expectations of generating more than 60% of production from the advantaged assets by the end of this decade. The company is also projecting its per-barrel profit to jump to $13 by 2030 from $10 in 2024.In the upstream business front, the British energy giant also has a strong footprint and mentioned in the recent earnings call, the commencement of three key projects — Cypre in Trinidad, Raven Infills in Egypt, and GTA in Mauritania and Senegal.However, compared to ExxonMobil, BP appears to be in an earlier or more conservative stage of upstream expansion. While XOM has set solid breakeven targets of $35 per barrel by 2027 and $30 per barrel by 2030, no such targets are being disclosed by BP. This strongly signifies that XOM has enough consistent data to make those forecasts, as it has a stronger, more optimized and more profitable upstream portfolio.XOM’s Stable Low-Carbon Front, BP’s Uncertain TransitionIn the low-carbon businesses – focusing on carbon capture and storage, hydrogen and Mobil Lithium – XOM is expecting to generate earnings of $1 billion by the end of this decade. Since the business is not vulnerable to oil and gas price fluctuations, XOM expects to generate steady income in the long run.With the gas trading side underperforming, BP reported weak results in its gas and low-carbon segment in the first quarter of 2025. Although the company is actively involved in clean energy initiatives, it hasn't clearly outlined the long-term prospects and return expectations.XOM Keeps Raising Dividends, BP’s Track Record Isn’t as StrongReflecting the consistency and strength of dividend payments, XOM’s track record depicts a picture of more than 40 consecutive years of dividend increases. However, BP doesn’t have such a solid dividend payment history and cut its dividend in 2020 when the coronavirus pandemic hurt worldwide oil demand. However, just looking at dividend yield payments, BP’s 6.5% yield is higher than XOM’s 3.7%. Image Source: Zacks Investment ResearchAre Investors Willing to Pay a Premium for XOM Over BP?XOM has a stronger balance sheet and significantly lower exposure to debt capital than BP. XOM’s total debt-to-capitalization is 13.4%, considerably lower than BP’s 42.9%. Thus, ExxonMobil can rely on its balance sheet to sail through an uncertain business environment. Image Source: Zacks Investment ResearchConsidering all the positive developments, it seems that investors are willing to pay a premium for XOM over BP. Specifically, XOM is trading at a trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio of 6.61, significantly higher than BP’s 2.91. Image Source: Zacks Investment ResearchBetween XOM & BP, Which Stock Has the Edge?However, with tariff concerns still weighing on the stocks, with long-term energy demand remaining uncertain, it would be better not to rush to bet on either stock. Shareholders of both companies should retain their stocks. Those holding XOM stand to benefit more from those who own BP.That’s because ExxonMobil explains its oil and gas business with clearer numbers and targets. Also, XOM’s clean energy plan is like a well-planned side business that’s already set up to generate steady income, while BP is still working out how to make its green projects reliably pay off.Notably, both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 BP p.l.c. (BP): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks