ExxonMobil Isn't Just an Oil Company; It's an Innovative Technology Company Hiding in Plain Sight
ExxonMobil (NYSE: XOM) is one of the largest oil producers in the world. Its oil and gas business is a big moneymaker; the company earned $12.7 billion from its upstream operations during the first half of this year. So it can be easy to miss that Exxon is more than just an oil and gas company.
At its core, ExxonMobil is an innovative technology company. That means the Exxon of tomorrow isn't likely to look like the company of today, which looks much different from the one that started over a century ago. Exxon is investing heavily in building new businesses, which provides it with lots of optionality and avenues for profitable growth in the coming years.
ExxonMobil, the technology company
ExxonMobil doesn't see itself as an oil company. CEO Darren Woods described the company on its recent second-quarter conference call:
As a technology company that transforms molecules to meet society's needs, we're not defined by our existing product suite. We began as a maker of kerosene for lamps. Today, no one thinks of ExxonMobil as a kerosene company serving the lamp industry. In the future, ExxonMobil will be defined by the technologies and products it is producing to meet the world's future needs, as always, by drawing on our unique combination of competitive advantages.
As Woods noted, Exxon has evolved over the years. It has gone from supplying kerosene for the lamp industry to a globally integrated energy company. Exxon doesn't just produce oil and gas like many others in the sector; it transforms those hydrocarbon molecules into higher-value refined products and petrochemicals in its downstream operations.
Exxon's ability to adapt in the past bodes well for its future. The company continues to innovate at the molecular level. That has enabled it to launch new technologies and products that could help fuel its growth in the coming years.
Turning innovation into growth drivers
Woods highlighted two of its recent advancements on the second quarter call that have significant market potential: Proxxima and carbon materials. He noted, "With Proxxima, we transform lower-value gasoline molecules into a high-performance, high-value thermoset resin that can be used in coatings, light construction materials, and advanced composites for cars and trucks, including battery boxes for electric vehicles." Proxxima is lighter, stronger, more durable, and produces fewer emissions than the current alternatives.
The company is already turning Proxxima into a commercial product. It's investing in projects in Texas that should start up next year and significantly expand its Proxxima production capacity. Exxon believes the total addressable market for this product will reach 5 million tons and $30 billion by 2030. Meanwhile, it sees demand growing faster than the economy and that its investment returns should exceed 15%.
Woods also noted the sizable opportunity Exxon sees ahead for carbon materials. The company is "transforming the molecular structure of low-value, carbon-rich feeds from our refining processes into high-value products for a range of applications." He said Exxon is targeting high-margin markets that are growing faster than the economy, such as carbon fiber, polymer additives, and battery materials.
The company is looking to lean into opportunities by developing plans to accelerate the growth of both businesses, which it expects will be very profitable. Woods hopes the company can ramp up its investments to turn them into meaningful contributors soon. That would help further diversify its earnings and help grow value for shareholders significantly in the future.
Proxxima and carbon solutions are just two of the many examples of the company's innovation. They help drive its belief that Exxon will be able to "grow profitably far into the future across a wide range of scenarios, including a rapid energy transition," where oil demand dries up faster than the company currently anticipates.
Exxon's evolution puts it in a strong future position
Exxon views itself as a technology company that transforms molecules into higher-value products. The company's investments in innovation are yielding results, as Proxxima and carbon solutions could soon become meaningful growth drivers. The company's innovations position it to continue growing no matter what happens in the energy markets, making it a compelling long-term investment opportunity.
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
