ExxonMobil (NYSE:XOM), the oil titan, has announced its entry into the electric vehicle (EV) sector with plans to produce battery-grade lithium. The move comes as the company acquired land in Arkansas's Smackover Formation earlier this year and is now targeting to commence production by 2027. The oil giant's ambitious strategy aims to support the production of one million EVs annually by 2030.
The announcement was part of a broader strategy outlined by Exxon's Dan Ammann, which includes a $17 billion investment through 2027. This investment will focus on advancing carbon capture, hydrogen production, and biofuels development, aligning with the growing demand for environmentally friendly energy solutions.
Exxon's approach to lithium extraction will utilize Direct Lithium Extraction (DLE) technology, which is expected to have lower carbon emissions than traditional methods. This technology is already in use by Imperial Oil (NYSE:IMO), a subsidiary of ExxonMobil, in partnership with E3 Lithium Ltd. in Alberta. There, they are transforming an old oil field into a lithium source. The pilot plant commissioned earlier this year has achieved exceptional flow rate ratios, and E3 Lithium has produced high-purity lithium hydroxide monohydrate (LHM), positioning it as Canada's largest measured and indicated lithium resource following a recent update to its mineral estimates.
The move by ExxonMobil is timely, as EV sales have surged this year, and forecasts indicate a significant increase in U.S. demand for lithium batteries. By engaging potential industry partners and leveraging innovative extraction technologies, ExxonMobil is positioning itself as a significant player in the transition to a more sustainable energy future.
InvestingPro Insights
In light of ExxonMobil's strategic pivot towards the EV sector and lithium production, the company's financial health and stock performance become even more pertinent for investors. According to InvestingPro data, ExxonMobil boasts a robust market capitalization of $413.87 billion and an attractive price-to-earnings (P/E) ratio of 10.27, suggesting a potentially undervalued stock in comparison to earnings. The company's commitment to shareholder returns is evident with its impressive track record of raising dividends for 41 consecutive years, with a current dividend yield of 3.63%.
InvestingPro Tips highlights that ExxonMobil operates with a moderate level of debt and possesses liquid assets that exceed short-term obligations, indicating a strong financial position. Moreover, analysts predict the company will remain profitable this year, which is corroborated by a return on assets of 11.42% over the last twelve months as of Q3 2023.
For investors seeking additional insights, InvestingPro offers a plethora of tips, with 11 more listed for ExxonMobil, providing a comprehensive analysis of the company's prospects. It's worth noting that an InvestingPro subscription is now available at a special Cyber Monday sale with discounts of up to 55%, offering an opportune moment for investors to access valuable market intelligence.
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