chevron-vs.-exxon-one-clear-winner

Chevron Vs. Exxon: One Clear Winner

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My new Deep Value Dividend Growth Portfolio or DVDGP (beating the market by about 10.6% so far) is designed to represent my top picks at any given time for new money. Each company in the portfolio is one I consider to be a low-risk dividend growth investment that is likely to deliver not just safe and steadily rising income in all economic conditions, but market-beating double-digit total returns over time.

The underlying strategy behind this portfolio is to use several watchlists to build up a database of quality low-risk companies that are worth owning, and then buy them at opportunistic times, when they are trading at attractive and usually deeply undervalued prices.

Not surprisingly, given our "quality first" approach the portfolio is chock full of dividend aristocrats, companies who have raised their dividends for at least 25 consecutive years.

In recent weeks, readers have asked me why DVDGP owns Exxon Mobil (XOM) but not Chevron (CVX). To answer that let's take a look at how both dividend aristocrats stack up compared to each other, to see why, though both companies are worth owning in a diversified dividend portfolio, today Exxon is clearly the superior long-term buy. In fact, from today's prices, I consider Chevron a "buy" while Exxon is a "strong buy".

Dividend Track Record: Winner Exxon But Not By Much

When it comes to dividend track records both Exxon and Chevron have not just the best track records in the industry, but some of the most impressive in all of corporate America.

  • Exxon: uninterrupted dividends since 1882 (137 years)
  • Chevron: uninterrupted dividends since 1912: (107 years)

Over a century of continuous dividend payments from any company is impressive, even more so from blue-chips in a notoriously cyclical industry such as this.

But of course, the real claim to fame for Exxon and Chevron is in their dividend aristocrat status.

Exxon Mobil

(Source: Simply Safe Dividends)

Exxon has been paying rising dividends for 36 consecutive years and growing its payout at an impressive rate over both short-term and long-term time frames.

Chevron

(Source: Simply Safe Dividends)

Meanwhile, Chevron's dividend track record is slightly below that of Exxon, both in terms of consecutive annual growth, as well as short and medium-term growth rates. But it should be noted that Exxon and Chevron are both great companies and just two of three aristocrats in the energy sector (Helmerich & Payne is the third and Enbridge will become an aristocrat in late 2019).

While an objective dividend track record analysis gives the win to Exxon, both companies are well worth owning if you want exposure to the oil sector. That's because, more important than impressive dividend growth over time, is the fact that both Exxon and Chevron offer very safe dividends, that make them excellent sleep well at night or SWAN stocks for even the most conservative income investors (including retirees).

Dividend Safety: Tie

There are two parts to a safe dividend, a payout that's well covered by free cash flow, and a strong balance sheet.

Company Yield TTM FCF Payout Ratio Safety Score (Out Of 100)
Exxon 4.5% 81% 84 (Very Safe)
Chevron 3.9% 59% 83 (Very Safe)

(Source: Simply Safe Dividends)

Both Exxon and Chevron pay very generous dividends and are currently covering their dividends with free cash flow with ease. However, in terms of payout ratio, Chevron has the clear edge thanks to smaller capex spending which is boosting its FCF right now. Yet Exxon still sports a Simply Safe Dividends (where I'm an analyst covering about 200 companies per year) safety score of 84, which is ever so slightly ahead of Chevron's very safe score of 83.

That's due to the most important safety metric oil income investors need to focus on, the balance sheet.

Company Debt/EBITDA Interest Coverage Ratio Debt/Capital S&P Credit Rating Average Debt Cost
Exxon Mobil 0.7 48.8 11% AA+ 2.0%
Chevron 0.8 22.0 18% AA 2.0%
Industry Average 1.8 11.5 24% NA NA

(Sources: Gurufocus, Fast Graphs, CSImarketing)

While Exxon has a slight edge over Chevron when it comes to debt levels, Chevron's balance sheet is also a fortress. That's why both companies enjoy not just the best credit ratings in the industry, but some of the strongest in corporate America. In fact, thanks to overseas borrowing, both company's effective average interest rates are below that of the US Treasury (about 3%).

(Source: Chevron investor presentation)

The reason that a strong balance sheet is critical to oil company dividend safety is that legacy oil wells decline at about 5% per year. Thus oil companies must always be investing in production growth no matter what oil prices or their free cash flow look like at any given time.

Since dividends are ultimately paid out of free cash flow (operating cash flow minus capex) no oil company can become or remain an aristocrat without a proven ability to maintain a bank vault safe balance sheet. During oil crashes, they take on lots of debt, to both cover capex and dividends, and during boom times they use retained FCF (free cash flow minus dividends) to pay that debt down to prepare for the next industry downturn.

Specifically, during the oil crash of 2014 to 2016, Exxon's debt levels rose by $15.7 billion, while Chevron's increased by $16.6 billion. Since oil prices began recovering Exxon has paid off $4.4 billion while Chevron has paid down its debt by $9.5 billion. The reason that Exxon has been slower in paying down its debt is that it's always had the lowest debt/capital ratio in the industry, and thus the strongest balance sheet. As a result, it has been able to focus more on aggressive growth spending, while Chevron has been focused on cost-cutting and maintained a conservative capex profile (more on this in a moment).

But the point is that while Exxon's debt levels are the best in the industry, Chevron is a close second, which is why both oil giants have very safe dividends you can rely on, even during a recession or oil crash.

Quality: Winner Exxon...For Now

The most important thing for any income investor to ask before buying a company is not whether the company is a good bargain right now, but whether it's worth owning at all. As Warren Buffett famously said

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett

Or to put another way, quality must always come first, and only if a company is well run, and has a good corporate culture of strong capital allocation and dividend growth, should you consider it's price.

Company quality is mainly to do with management, and fortunately, both Exxon and Chevron have the two best management teams/corporate cultures in the industry.

Chevron is led by CEO Mike Wirth, a 37-year company veteran steeped in the company's culture of strong capital allocation and lean operations. Exxon is led by CEO Darren Woods, who has been with Exxon for 27 years and similarly plans to remain dedicated to maintaining the company's strong track record of high returns on capital employed or ROCE.

ROCE is the standard capital allocation metric used by oil companies and is EBIT/total invested capital (both debt and retained earnings). Returns on invested capital is the more standardized capital allocation metric for all corporations and is post-tax net operating profit/total invested capital.

Both are important proxies for quality management, specifically that a company is making wise investment choices over time.

(Source: Exxon investor presentation)

Exxon has historically commanded the best ROCE in the industry, with Chevron coming in at #3 over the past decade. Both companies have also reported relatively low write-downs on investment that have ended up being failures (or that they overpaid for).

But it should be noted that Exxon's ROCE fell to just 7% in 2017, due to lower oil prices. The company's long-term plans (more on this in a minute) calls for that to get back to 15%, which is slightly below its historical norm. In contrast, Chevron's more focused and leaner growth plans have analysts expecting its ROCE to rise to 20% by 2020, which will make it the industry's new profitability king.

Company Return On Equity Return On Invested Capital Operating Margin FCF Margin
Exxon 12% 8% 8% 6%
Chevron 9% 6% 8% 8%

(Source: Simply Safe Dividends)

Over the past 12 months, Exxon has managed to maintain its profitability lead over Chevron, though by only a small amount. And given Exxon's massive capex spending plans, I think it's highly likely that Chevron will indeed soon become the highest quality oil major you can own (with Exxon falling to #2).

Why are Exxon and Chevron likely to switch places in terms of profitability and overall quality? That would be their management team's different growth plans.

Exxon's Growth Plans Are More Ambitious And Clear

According to Exxon's CEO, today is the best time in almost 20 years to invest heavily in growing oil production. That's because, according to the US Energy Information Administration, or EIA, 80% of new oil supply by 2040 will merely offset natural production declines.

(Source: Exxon investor presentation)

Today the world's oil industry is producing about 100 million bpd but because of natural decline rates, about 3 million bpd of new supply is required just to keep global supplies constant. Add to that about 1.5 million bpd in new demand growth from rapidly growing emerging markets like China and India, and the industry needs to grow supply by 4.5 million bpd annually in order for supply to keep up with demand (and keep oil prices from spiking).

But according to private equity analyst firm Burggraben Holding, the current projects oil companies are working on will bring online just 1 million to 1.5 million bpd of new supply by 2022. Or to put another way, the oil industry, having slashed spending during the 2014-2016 oil crash, is currently underinvesting by a massive amount that threatens a major supply shock in the future.

Exxon estimates that between 2019 and 2040 the global oil industry would need to invest about $400 billion per year or $8.4 trillion in total, to avoid such a major supply gap. While most oil majors are not stepping up to the plate, Exxon is planning on a huge investment ramp up.

  • 2016 (oil crash): $19 billion in capex
  • 2017: $23 billion
  • 2018: $24 billion
  • 2019: $28 billion
  • 2020-2025: Average of $30 billion per year

Specifically, the company plans to increase its annual investment budget by almost 60% by 2020 over 2016 levels and spend a total of about $208 billion over the next seven years to achieve the following

  • Increase production by 25% from 4 million bpd oil equivalent to 5 million bpd oil equivalent.
  • Increased chemical production by 30% (40% in North America and Asia).
  • 20%, 20%, and 15% ROCE on production, refining, and chemical, respectively.
  • earnings from refining and chemical will double
  • earnings from oil & gas production will triple (assuming an average global oil price of $60 oil).

Exxon's big growth plans might be ambitious but management has outlined a very realistic road map to achieving this huge growth in earnings and cash flow.

One of its big growth catalysts is offshore production from Guyana, a small South American country.

(Source: Exxon Earnings Presentation)

Like in the mightly US Permian basin, Guyana has been blowing away expectations as oil companies make ever more large oil reserve discoveries. In fact, Exxon, which recently dispatched a second exploration ship to the country, announced its 10th major Guyana reserve discovery in December. That has sent Guyana's estimated recoverable reserves north of 5 billion and sets the country up to become a major oil producer in the future.

Exxon is in a joint venture with Hess (HES) to develop Guyana's oil production and currently expects 100,000 bpd of production to be underway by 2020. But with five offshore platforms planned for Guyana, Exxon expects oil production to rise to about 750,000 bpd by 2025. Exxon's share of that would be about 340,000 bpd meaning that Guyana alone can likely get it more than a third of the way to its 1 million bpd production growth target.

(Source: Exxon Earnings Presentation)

Another key growth area for Exxon is liquified natural gas or LNG. Exxon is currently working on two major LNG projects in Papua New Guinea and Mozambique that could potentially boost its 2025 LNG capacity to the highest levels of any company in the world (based on current production capacity).

Then there's Brazilian offshore production, where Exxon enjoys the largest net acreage.

(Source: Exxon Earnings Presentation)

Thanks to much lower drilling costs (courtesy of cost-cutting undertaken during the oil crash) Exxon believes it can achieve over 10% returns on investment even at world oil prices of just $40 in Brazil.

But by far Exxon's biggest medium-term growth catalyst is US shale, where it currently owns about 10 billion barrels of low-cost reserves that it estimates can generate 10+% rates of return on $35 US oil (currently about $55).

(Source: Exxon Investor Presentation)

Exxon's biggest push into US shale is in the Permian basin which Rystad Energy estimates might hold about 250 billion barrels of remaining recoverable reserves. About 140 billion of those barrels have breakeven prices of $40 or less.

(Sources: Rystad Energy, Rattler Midstream S-1)

That would make the Permian potentially the largest oil formation ever discovered and Exxon has ambitious plans to cash in on the low production cost bonanza.

In 2017 the company bought Bass Energy for $6.6 billion to double its Permian reserves to 6 billion barrels. Along with ongoing bolt-on acreage additions, Exxon is now planning to ramp up its Permian production by 400% by 2025. More importantly, because of production costs potentially falling as low as $20/barrel, Exxon believes this extra production will generate ROCE of over 30%.

That's what's so impressive about Exxon's growth plans. Not just is planning on spending hundreds of billions to grow in the coming years, but it's focusing purely on high margin projects that should send free cash flow soaring.

(Source: Exxon Investor Presentation)

Even if oil prices were to fall to $40 by 2025 Exxon would still generate enough free cash flow to cover the current dividend.

Oil Price In 2025

Exxon Annual Free Cash Flow

FCF Payout Ratio (Current Dividend)

Annual Retained FCF

$40

$15 billion

93%

$1.1 billion

$60

$31.5 billion

44%

$17.6 billion

$73 (Analyst Consensus)

$38.3 billion

36%

$21.9 billion

$80 (My Best Estimate)

$52 billion

27%

$38.0 billion

(Sources: Exxon guidance, Morningstar, GuruFocus)

And if oil prices rise to realistic levels such as $80 based on secular fundamentals, then the company's free cash flow will explode to one of the highest in the world (second only to Apple's in fact). Even if you account for likely 6% to 7% dividend growth through 2025, Exxon would be looking at about $32 billion in retained FCF which it could devote to paying down debt, buybacks or investing in renewable energy to prepare for a post-oil future.

Basically, Exxon is my favorite integrated oil major because I like management's ambitious growth plans, and think Exxon can realistically achieve its growth plans while maintaining strong capital allocation discipline.

But while Exxon may be my favorite oil major right now, that's not to say that Chevron's plans aren't also impressive.

Chevron's Growth Plans Are More Focused And Primed To Make It The Most Profitable Oil Major

Like all oil giants, Chevron responded to the oil crash by slashing its capex budget, by about 2/3 from its 2013 peak. Management focused on cost-cutting to reduce its total production costs and plans to keep doing that through at least 2020 when average per barrel costs will have fallen about 50%.

(Source: Chevron Investor Presentation)

But what's so impressive about Chevron's efforts is that it was able to slash expenses without sacrificing its fundamentals, specifically production volumes (stable through the oil crash) or proven reserves, which actually went up.

That's because Chevron has historically had one of the best reserve replacement ratios in the industry. The RRR is just the amount of new reserves a company finds each year/its production. A figure over 100% is what investors want to see over time because it means that an oil company will be able to keep growing production, cash flow, and dividends for many years or even decades to come.

  • five-year average RRR: 107%
  • 10-year average RRR: 171%

Chevron estimates it has about 69 billion barrels of oil equivalent in potential reserves that should allow it to maintain current production rates for 40 years, the longest production runway in the industry.

(Source: Chevron Investor Presentation)

Chevron has proven a master at squeezing out the most from existing assets, and its current medium-term (2020) plan is to focus on short-term projects that can be generating cash flow within two years. 75% of its capex is going towards such projects, with 90% of investments focused on growing its oil production.

(Source: Chevron investor presentation)

Chevron expects to hit the high end of its guidance, by growing net production by 7% in 2018, and then 4% to 7% in 2019 and 2020. That kind of growth rate would be one of the best in the industry. And Chevron's plans to achieve it while spending a modest $18 to $20 billion per year in capex (37% less than Exxon) is with a strong focus on US shale.

Over the past year, Chevron has been steadily adding to its Permian acreage, which now stands at 2.2 million. That boosted potential reserves by 20% to 11.6 billion barrels (16% of the company's total).

(Source: Chevron investor presentation)

The Permian basin (which Midland and Delaware are a part of) has been beating the company's own expectations for years. And in Q3 2018 Chevron's Permian production grew 80% to 338,000 bpd and helped to drive the company's production levels to an all-time record of 3 million bpd. For context, if Chevron was its own country, it would be the 11th largest oil producer in the world. Exxon would be #8.

The key for Chevron in the Permian is that it was one of the early movers in the basin. Thus it was able to acquire acreage at not just low cost, but also with low to no royalty payments on 80% of its total acreage. Combined with a greater than 40% reduction in drilling costs in the Permian Chevron expects to mint money while nearly doubling its Permian production through 2022.

But while the Permian basin is Chevron's most promising shale asset, it's far from the only one.

(Source: Chevron Annual Report Supplement)

About 25% of the company's potential reserves are in global shale deposits including in Canada and Argentina. And while 75% of Chevron's focus is on higher-margin oil production, it's also a major player in the booming Marcellus/Utica shale, which is expected to deliver strong production growth for decades.

(Source: EQT Midstream Investor Presentation)

That's because, while oil gets the headlines, gas has the longer overall growth runway. That's thanks to gas being far cleaner than coal, which is why it's fast replacing coal-fired power plants (just one of many industrial uses).

(Source: EIA)

And when combined with LNG export demand from the rest of the world, the US Energy Information Administration expects US gas production to grow not just faster than oil (by about 3 times) but through 2050 and likely beyond.

Thus Chevron's investments in shale gas are a smart way to ensure it has adequate production to meet this demand. But this brings us to Chevron's other big growth catalyst, LNG.

While it's true that the company has struggled with years of setbacks and costly delays (see risk section), in 2018 it finally completed its Gorgon and Wheatstone Australian LNG projects. These are expected to deliver about 400,000 bpd of oil equivalent and are indexed to oil prices (thus boosting profitability) under long-term contracts (up to 20 years), with key import clients like China.

What's more, now that Gorgon and Wheatstone are done, they will be providing highly stable and recurring cash flow, and with minimal maintenance requirements and virtually no decline rates, relative to traditional oil projects.

Basically, Chevron's growth plans call for doubling down on super lean investments in high margin projects, that can be brought online quickly and with minimal risk of cost overruns. This is why analysts expect that within two years Chevron will become the most profitable integrated oil major.

But while Chevron may ultimately steal the quality and profitability crown from Exxon, there is another major reason to buy Exxon over its rival right now. That would be a superior total return profile.

Total Return Profile: Exxon Offers Better Long-Term Return Potential Right Now

While in the short-term stock prices are based on sentiment, over the long-term they are based only on fundamentals, meaning cash flow and dividend growth.

Company Yield Long-Term Expected Dividend Growth Total Return Expected (No Valuation Change) Valuation-Adjusted Total Return Potential
Exxon 4.5% 6% to 7% 10.5% to 11.5% 12.8% to 13.8%
Chevron 3.9% 3% to 7% 6.9% to 10.9% 9.9% to 10.9%
S&P 500 2.0% 6.4% 8.4% 3% to 9%

(Sources: Simply Safe Dividends, Fast Graphs, Gordon Dividend Growth Model, Dividend Yield Theory, Morningstar, Analyst consensus, Analyst Forecasts, Moneychimp)

Thanks to Wall Street being upset with Exxon's big spending plans (riskier than Chevron's and thus fewer buybacks), it offers a superior yield as well as better long-term cash flow growth potential. Analysts currently expect XOM's FCF/share to grow about 12% annually over the next five years while CVX's is expected to come in at a much smaller 3.4%, according to Factset Research.

However, it should be noted that a big reason for Exxon's more bullish growth forecast is due to management being more clear about its growth plans (2025 outlook vs 2020 for Chevron). I'm confident that Chevron is going to find plenty of growth opportunities in 2021 and beyond to help it achieve its historical 6% to 7% long-term dividend growth.

Thus I consider both Exxon and Chevron likely to deliver market-beating double-digit total returns over the next five years, even if their valuations don't change. For context, the S&P 500 has historically delivered 9.1% CAGR total returns and from current valuations I expect it to deliver about 8% to 9% over the coming five years. Other analysts are less optimistic and think the market will deliver anywhere from -4% to 5% total returns.

Thus both Exxon and Chevron are likely to make great high-yield investments that will both pay you safe and steadily growing dividends, while also delivering good returns. But when we consider valuation, then the case for Exxon becomes even stronger with long-term total return potential climbing to about 13% or possibly two to three times what the S&P 500 is likely to deliver.

Valuation: Winner Exxon

There are lots of ways to value a stock, but for oil companies, I consider three most useful. The first is to look at an oil major's price to operating cash flow compared to its historical norms.

Company P/OCF 20-Year Avg P/OCF Growth Rate Baked Into Share Price

Expected 5 Year Growth Rate (Analyst Consensus)

Exxon 8.2 10.3 0.3% 12.3%
Chevron 7.0 7.8 -0.4% 3.4%

(Sources: Fast Graphs, Benjamin Graham)

Thanks to the volatile nature of oil prices, oil companies don't usually trade at high multiples of operating cash flow. But today both Exxon and Chevron are trading at discounts to their historical operating cash multiples, which are baking in very low growth rates, far below what analysts expect. Even if analysts are ultimately way off the mark, both companies might be poised to see some multiple expansion if they beat these very low hurdle rates.

To get an idea of just how much multiple expansion investors could realistically see, I turn to my favorite blue-chip dividend stock valuation method, dividend yield theory or DYT. This is the sole strategy that asset manager/newsletter publisher Investment Quality Trends has been using to generate decades of market-beating returns and with 10% lower volatility to boot.

(Source: Investment Quality Trends)

DYT compares a stock's yield to its historical norm because over time yields, like most valuation metrics, tend to return to a relatively stable level that approximates fair value.

Company Yield 5-Year Average Yield Estimated Discount To Fair Value Upside To Fair Value Long-Term Valuation Boost

Valuation-Adjusted Total Return Potential

Exxon 4.5% 3.6% 21% 26% 2.3% 12.8% to 13.8%
Chevron 3.9% 3.9% 0% 0% 0% 9.9% to 10.9%

(Sources: Dividend Yield Theory, Simply Safe Dividends, Moneychimp)

In this case, I'm using the five-year average yield to estimate fair value because that period includes two oil crashes, and so should provide a relatively conservative estimate. Under DYT Chevron appears fairly valued while Exxon is about 21% undervalued. Thus Exxon has more upside that, over time, should cause shares to outpace cash flow and dividend growth.

One final valuation approach I consider useful is Morningstar's conservative three-stage discounted cash flow or DCF model. This is a 100% long-term, fundamentals-driven approach that uses some of the most conservative growth assumptions on the Street. Basically, if Morningstar says a stock is undervalued, they are usually right and you can buy a quality blue-chip with confidence.

Company Estimated Fair Value Discount To Fair Value Upside To Fair Value

Long-Term Valuation Boost

Exxon $90 19% 23% 2.1%
Chevron $136 14% 19% 1.8%

(Source: Morningstar)

Morningstar disagrees with my DYT model in that it considers CVX to be undervalued and thus a potentially strong buy. But note that Exxon's discount to fair value agrees with DYT and is superior to CVX's, giving the slightly better long-term valuation boost potential.

Basically, you can likely buy either Exxon or Chevron with confidence that you're paying fair value at worst, but possibly at a high margin of safety. Since my own total return models are DYT based I consider Chevron to be a "buy" while Exxon is a "strong buy".

Of course, that's only for investors who are comfortable with these companies' risk profiles.

Risks To Keep In Mind

While Exxon and Chevron are low-risk stocks, from a dividend safety perspective, that doesn't mean that investors don't have to consider several risks involved with owning either of them.

(Source: JPMorgan Asset Management)

First of all, we can't forget that neither company has any branding power since all the products they sell are commodities whose prices are set on world markets. And as you can see, oil prices have historically been, and will likely always be, extremely volatile. That includes a 70% crash during the Great Recession, a 59% crash between 2014 and 2016, and most recently, a 2-month 45% crash that was one of the fastest and most severe in industry history.

While both companies have more than proven they can deliver safe and growing dividends in all economic and industry conditions, their share prices can still fall fast and hard, especially during bear markets.

  • Exxon fell 28% during the Great Recession vs S&P 500 57%
  • Chevron fell 34% during the Great Recession

Now the good news is that thanks to their stellar track records as dividend aristocrats both Exxon and Chevron have relatively low volatility during bear markets. But as you'll note both still suffered large short-term declines during the last bear market. Thus it's very important that income investors remember that the "very safe" risk ratings on these stocks does NOT indicate that they will necessarily hold up well during either an oil crash or a bear market. The dividends will keep rolling in yes, but you still have to use proper asset allocation to ensure you don't make a costly mistake like panic selling during a market plunge, even with blue-chips like these.

Which brings us to the biggest fundamental risk for both companies. In the short and medium-term that's the necessity of running capex heavy and costly empires while having to deal with highly volatile cash flow.

While shale oil projects are usually short-term, able to be ramped up and generating cash flow quickly, ultimately both Exxon and Chevron are so large that long-term production and cash flow growth requires investing in expensive and costly international projects.

(Source: Chevron Investor Presentation)

This means that both companies have to make educated guesstimates about where oil prices will be for their long-term capital allocation/budgetary decisions. Each has internal models but also looks at industry forecasts such as this one provided by the International Energy Administration or IEA.

You'll note that the IEA is highly bullish on oil & gas, because by 2040, whether or not the world's countries live up to their Paris Accord agreements (thus far all are falling way short), oil & gas is expected to still makeup either the plurality or majority of the world's energy mix.

But the thing to remember about such forecasts is that they are all based on the latest data and trends, plus a lot of assumptions. In other words, they are all probabilistic in nature and can change over time.

What's more, there are lots of varying forecasts out there, including ones that disagree on very important conclusions.

The similar sounding analyst firms (actually separate companies) McKinsey and Woods Mackenzie estimate a six-year difference in when global oil demand will peak. That might not sound like a meaningful difference but in a market where crude is priced at the margin and even minor changes in supply vs demand can cause massive swings in price, it most certainly is.

And we can't forget that these are just two analyst firms, whose six-year peak oil estimate is actually based on very minor differences in assumptions regarding EV adoption, and climate change legislation/success rates. Neither McKinsey or Woods Mackenzie is assuming that the world won't eventually transition to a renewable energy future, they merely differ slightly in how fast we'll get there.

Another risk to consider is that both Exxon and Chevron are operating around the world, including in emerging markets where lack of infrastructure and or political corruption can make bringing complex and costly projects online and on budget rather difficult.