Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) are two of the oil industry’s leading giants. With the price of oil dropping and worries about inflation and the consumer on the horizon, both share prices have sold off to levels that may make them attractive buys for investors.
But if you had to pick between Warren Buffett’s favorite, CVX or the former largest company in the world, XOM, which energy stock wins?
Chevron’s Breakeven Is a Competitive Advantage
Chevron is most notable for its presence in the Permian Basin, though it does have other projects elsewhere. Thanks to the easy accessibility of oil in the Permian Basin, a majority of Chevron’s sites have breakeven points of $50 per barrel or less.
In addition to its existing production, Chevron is also working to increase output from the Permian Basin. Management forecasts 9-10% output growth from its wells in the area this year, with a slightly lower growth rate prevailing in 2026. This increase in production is tied to its deployment of so-called triple-frac technology, an advanced form of hydraulic fracturing that reduces the time and cost of oil production.
Like most energy companies, Chevron offers a dividend that is far above the average market yield. In CVX’s case, the yield is currently 4.7%.
After selling off more than 16% in the last 12 months, Chevron is also trading at a fairly appealing valuation of 15.5x earnings and 1.3x sales. Analysts expect to see fairly strong returns from the stock over the next 12 months, as the average price forecast for CVX implies a gain of 22% to $165.45.
Exxon Mobil Diversified Streams Are Unmatched
Larger even than Chevron, Exxon Mobil is a highly diversified oil company that operates on six continents. The company is the largest private sector oil business in the world, with only state-owned enterprises exceeding its scale.
One of Exxon’s biggest selling points for investors in recent years has been its program of share buybacks, something that Chevron is currently cutting back on.
Even with oil prices sliding, Exxon is maintaining its spending on buybacks, dividends and CapEx. This higher level of investment during a lean time for the industry could enable Exxon to emerge in a stronger position relative to companies like Chevron that are forced to cut back.
Exxon’s dividend yield is lower than CVX’s at 3.7%, but it’s worth keeping in mind that this is still well above the S&P 500 average.
XOM also somewhat makes up for its lower current yield by offering more room for future growth. While Chevron’s payout ratio is about 75%, Exxon’s is considerably lower at 52%. As such, Exxon’s Board of Directors has more room to increase the payout going forward.
Exxon also trades at a P/E of 13.9x, slightly lower than Chevron’s. Analysts currently give XOM a consensus estimate of $124.06, a price that would see shares of the oil giant rise about 18.2% from their most recent close. Though a bit lower than what analysts are projecting for Chevron, the expected returns from XOM may very well outperform the market average, especially if oil prices begin to rebound.
The Guyana Dispute Affects Both XOM and CVX
One concern that investors should be aware of where Exxon is concerned is the ongoing battle with Chevron over Hess’s oil rights in Guyana.
The waters off of Guyana have yielded unexpectedly large oil finds in recent years, and Exxon is currently a major partner with Hess in drilling and exploration there.
If Chevron is allowed to acquire Hess, an outcome that appears fairly likely, the result would be positive for CVX and negative for XOM.
Even with this possible setback, though, Exxon would be a long way from being counted out. The company is pursuing new explorations off of Cyprus, and future finds could help to offset the potential loss of the Guyana project to Chevron.
A final point of note about Exxon is the fact that it performs modestly better on most profitability metrics than Chevron. On a trailing 12-month basis, Exxon has reported a net margin of 9.8%, a return on invested capital of 11.0% and a return on equity of 12.7%.
Each one of these measures of profitability exceeds the respective number for Chevron. Although the difference isn’t massive, Exxon is a solid winner in this category.
CVX Vs XOM Stock, Which Energy Play Is Best?
The edge goes to Exxon Mobil stock thanks to a more attractive valuation, a bit more room for dividend growth and modestly higher profitability. They combine to make Exxon the narrowly better choice between two reasonably attractive investments.
In the cases of CVX, XOM and other oil stocks, it’s also worth taking into consideration that there could be a bit of a rough period ahead. A recession in 2025 is looking increasingly likely, and a drop in the price of oil connected to reduced economic activity would likely hit both the top and bottom lines of companies like Chevron and Exxon.
This doesn’t, of course, undermine the long-term investment thesis for either company. Both pay such lofty dividend yields that investors of either will be comforted by the supporting income during share price pops and drops. It’s possible, however, that both Chevron and Exxon could take some time to start delivering significant returns for their shareholders.
Luckily, oil prices could recover fairly quickly under the right set of conditions. Optimism about a US-China trade deal alone has caused some slight upward movement, and the repeal of the massive tariffs the countries have put on each other could result in rapid improvements in both the price of oil and share prices of large oil companies.
Demand for oil in Europe is also staying fairly strong. Some uncertain macroeconomic factors notwithstanding, both CVX and XOM still look like good stocks to own and hold as long-term plays on the oil industry.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.