Compared to the larger market, the oil and gas industry is having its finest year in years. Many investors are eager to buy stocks in this area. Because of its brand familiarity, ExxonMobil stock(NYSE:XOM) is likely to be the first firm that comes to mind.
Is it, however, the finest investment among its peers? Let’s compare ExxonMobil stock to one of its top competitors, TotalEnergies stock (NYSE:TTE)), to see which is the best oil stock to buy.
Stock Analysis: Similarities
Finding and developing top-tier oil-producing assets is something that both ExxonMobil and TotalEnergies have excelled at lately. Both firms claim that their respective breakeven prices are about $40 per barrel (the oil price at which they can cover operating costs, capital expenditures to sustain present operations, and dividends).
According to TotalEnergies, one investment condition for future initiatives is to be profitable at less than $30 per barrel after taxes. Similarly, ExxonMobil claims that at less than $35 a barrel, 90% of its capital expenditures should produce 10% returns.
Both corporations are placing significant bets on liquefied natural gas (LNG) as part of their medium- to long-term strategies. ExxonMobil intends to build 40 million tons per year (Mta) of LNG liquefaction and export facilities (it has about 20 Mta of liquefaction capacity today). TotalEnergies has around 10.5 Mta of new export capacity coming online, but it also has Europe’s biggest LNG import operation.
Stock Analysis: The devil is in the particulars.
The most significant differences between these two are in the chemical and refining industries and their separate strategies for a lower-carbon future. ExxonMobil’s refining and petrochemical sector outperforms the rest of the integrated oil and gas industry. Because of its massive presence in the Gulf of Mexico, it has access to cheaper feedstocks than most of the rest of the globe.
The assets produce higher-margin goods such as lubricants and performance chemicals such as polyethylene. Its investments in refining and chemicals constitute the most substantial chance to increase profits and cash flow, which are less affected by commodity prices.
Aside from oil and gas, another point of distinction between the two firms. TotalEnergies is investing heavily in power production, particularly wind and solar.
It considers electricity to be the third pillar of its company and plans to increase its power-generating capacity by 2025. TotalEnergies has spent over a decade developing expertise in renewable energy and batteries, and competencies such as offshore construction should translate well to offshore wind.
Which Stock to Buy
Both of these firms are well-positioned to flourish in today’s oil and gas markets and maybe beyond. TotalEnergies stock looks to be the superior bargain. Its stock is cheaper in terms of price-to-earnings and price-to-tangible-book-value. It also now offers a substantially greater dividend yield. It has a lower value, and its growth predictions aren’t that much worse than ExxonMobil’s to explain such a significant price differential. Exxon’s petrochemical sector and its capacity to earn substantial profits in reduced commodity-price scenarios cause me to worry. Overall, both firms look to be good buys right now.
Featured Image – Megapixl © Dudau
Author Okoro Chinedu 
