Exxon vs Chevron Stock: Tesla’s soaring share price has everyone believing in electric vehicles, but have you ever actually owned or driven one?
The International Energy Agency is projecting a new record 3% market share for American electric vehicles in 2020, up from the previous record 2.6% in 2019. That’s well above the 2% of global sales EV represent in the international market, meaning 98% of all motor vehicles on the planet (97% in the United States) are still running on gasoline. And even electric vehicles require oil like any other car.
Oil companies are still making money in the face of sustainable alternatives. In fact, the fossil fuel industry was deemed essential during the COVID-19 municipal shutdowns.
Virtual work leads to more deliveries, so even when you stay home, gas is being used to create your life. In fact, natural gas and oil still supply power in states like Arizona, where solar power is widely available.
Let’s look at Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) – the two biggest oil stocks in the U.S. – to see if they’re worthwhile investments. We’ll start with a breakdown of oil stocks versus the automotive industry.
Pros and Cons of Investing in Oil Stocks
We have a love/hate relationship with crude oil and petroleum (otherwise known as fossil fuels). It’s a limited resource created by the remains of plants and animals being covered with layers of earth so they’re heated and pressurized over millions of years.
Everything from kerosene and butane to oil and gasoline is made from fossil fuels.
This makes oil literally the fuel of our economy, keeping cars on the road and running our homes and offices. In fact, the 2000s saw a boom in the value of oil stocks, which maintained relatively well as solar and other technologies bullied their way into the legacy power industry. Despite a plunge in 2014-2016, the industry recovered relatively well.
An oversupply during those years drove oil barrel prices down, which itself was caused by less need for the supply. It’s nothing compared to the catastrophic blow dealt to oil demand during the COVID-19 crisis, which sent oil prices plummeting into the negatives as the global supply chain adjusted to a new virtual way of life.
The 2020 coronavirus is a historic event, but the oil industry quickly showed its willingness to overcome. Let’s breakdown what the top two players did.
Exxon Lost $1 Billion+ But…
Exxon forever became engrained in a generations’ minds when its Valdez tanker spilled nearly 11 million gallons of oil into the ocean just south of Alaska. This tragic accident didn’t stop it from merging with Mobil in November 1999 to form ExxonMobil, which became one of the most profitable companies in the U.S. from the 2010s through to today, according to Fortune 500.
Those fortunes don’t necessarily extend to the company’s employees, however. When faced with tough decisions from the coronavirus, Exxon employee 401k plan contributions were among the cuts made to get through 2020.
In fact, it drew a clear line in the sand that employees could hit the chopping block should it be necessary to satisfy shareholder demands.
This move has unionized workers furious, and the 2020s are set to be a major battleground between ExxonMobil and its worker unions.
However, even shareholders are trembling, as the company lost $1.1 billion in the second quarter of 2020 due to the COVID-19 crisis. This is compared to $3.1 billion profit in the second quarter of 2019, when the investment world was singing the company’s praises.
Now stock prices are lower than they’ve been since the early 2000s, and it’s seeking renewable energy sources to get back on the right track.
Chevron Dividend Has Been Rock Solid
While Exxon runs the east coast, Chevron runs the west coast, shoring its oil offerings with geothermal, hydrocarbon, and other chemical and power generation products.
While it doesn’t have the oil reserves Exxon does, Chevron’s stakes in other industries helped it generate enough revenue to rank only a few slots behind Exxon on the Fortune 500 for decades.
In March 2020, it was ranked 15th with an annual revenue of $146.5 billion and a $136 billion market valuation. Of course, the coronavirus ravaged its second quarter results, and the company posted a $3 billion loss, which caused a bearish chill that sent its stock downward. This may be a great discount for new investors who believe in the company’s push in other industries outside petroleum.
In August 2020, for example, Chevron invested in Zap Energy, a startup focused on using nuclear fusion to reduce our carbon footprint.
It also finalized the $5 billion acquisition of Noble Energy that provides it with a massive source of shale oil in the U.S., along with natural gas in Israel. In fact, it’s increasing its stake in oil while rivals are selling them off to focus on renewable energy.
Some analysts even believe Chevron’s solid dividend history makes it a better bet than ExxonMobil and other oil stocks, like BP (NYSE:BP). So long as the company’s supply chain and logistics remains solid this decade, they have a commodity everybody wants.
Exxon vs Chevron Stock: The Bottom Line
Big Oil has long been villainized for destroying the environment and using up precious non-renewable resources. However, we also depend on these companies for everything in our lives, from morning commutes to a hot shower, temperature control, and other creature comforts (even you reading this article likely used some form of municipal oil to run a server).
Exxon and Chevron are two of the country’s biggest oil giants, and they have different plans to create value for their shareholders. One is moving away from oil into more sustainable resources while the other is using this opportunity to supplement its already diverse offerings with more oil and gas resources while it can.
Whatever you believe, these legacy companies have been around for a long time and have the resources to make the necessary pivots. It’ll be interesting to see how society goes from here.
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.