Inside Exxon’s Empire: ($XOM)
Reviewing ExxonMobil’s 2025 10-K to understand how one of the world’s largest energy companies actually makes money.
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Exxon looks rather simple from the outside, a vertically integrated company that sells petroleum products, but under the hood it is one of the most complex and geopolitically exposed businesses in the world. I was genuinely surprised by the vast extent of its empire and the logistical nightmare of running a company that operates in highly unstable regions such as Indonesia, Equatorial Guinea, Nigeria, Iraq, and Russia.
Yet the business of black gold can be quite lucrative, and regardless of your views on climate change, the use of oil is ubiquitous in our world and likely is not going anywhere anytime soon. There are very few companies I’ve come across that sit as close to the center of the global economy as Exxon.
Why the hell am I covering Exxon? Well, I have several dozen 10-Ks lying around my house, and this was the latest one I picked up.
🏭 Business Overview
ExxonMobil’s history dates back to Standard Oil. After the Rockefeller empire was broken up in 1911, the Standard Oil of New Jersey division eventually became Exxon in 1972.
So before we jump start to the financials, let’s acquaint ourselves with an overview of the business.
Exxon’s principal business involves the exploration for, and production of, crude oil and natural gas, along with the manufacture, trade, transport, and sale of crude oil, natural gas, petroleum products, petrochemicals, and a wide variety of specialty products.1
So what exactly does that mean?
Let’s imagine Exxon believes there may be oil offshore in Guyana or natural gas in the Permian Basin. The company would first send in a group of experts, including geologists, engineers, and seismic specialists, to investigate. They study underground rock formations to determine where oil and gas may be trapped.
If the location looks promising, they drill a well. If the well comes up dry, they move on to the next location. If they strike oil, they keep drilling and begin developing the field.
From there, Exxon builds out the infrastructure. They bring in drilling rigs, offshore platforms, pipelines, storage facilities, drilling pads, tanks, and other equipment needed to support production.
As the oil and natural gas come up, the raw materials need to be separated, cleaned, processed, and stored.
Next, these raw materials are sent to refineries, where they are turned into gasoline, diesel, jet fuel, marine fuel, and lubricants. Lastly, Exxon sells the products, whether to wholesalers, shipping companies, airlines, or its own gas stations. Therefore, it is easy to see why Exxon is considered vertically integrated.
Because Crude Oil and Natural Gas are finite commodities, I am always curious how much they have in reserves:
Exxon ended 2025 with total reserves of 19,311 million oil-equivalent barrels, which is the amount of oil and gas the Company expects to produce. Although it still needs to build out infrastructure in many regions to export oil. In other words, Exxon has a massive resource base, but not every barrel is ready to generate cash tomorrow.
Alright, so they have over 19 billion expected barrels in reserve. How much are they producing on a daily basis?
Exxon produces 4,736 thousand barrels per day, up from 4,333 in 2024 and 3,738 in 2023. And to my surprise, most of these gains are coming from the United States. Natural gas also had a great year, as total natural gas production available for sale also increased to 8,442 million cubic feet daily. So now we have two important pieces of the puzzle: Exxon has a very large reserve base, and it is also increasing its current production.
The final piece is the economics of the barrel, because in this business, production volume alone does not tell you much unless you understand the spread between what Exxon sells a barrel for and what it costs to produce it.
Exxon sold its crude oil for an average of $65.18 per barrel in 2025, while its average production cost was only $10.20 per oil-equivalent barrel. Now I really don’t understand why my gas is so expensive. Jokes aside, that spread helps explain why low-cost assets matter so much in a cyclical commodity business.
So now that we’ve looked at the reserves, the production, and the economics of a barrel, let’s see where Exxon is actually making its money.
Exxon still made most of its money in Upstream. As explained above, this involves studying geology, drilling wells, building the infrastructure needed to develop a field, and then bringing the oil and gas to the surface. In simple terms, it is the part of the business that extracts raw resources from the ground.
Exxon earned $21.4 billion in 2025 in the Upstream division.
The fuel business (Energy Products) earnings rose to $7.4 billion from $4.0 billion, while Chemical Products moved in the opposite direction, falling to $0.8 billion from $2.6 billion. So even before opening the financial statements, we can already see the outline of the story: Upstream still does most of the heavy lifting, Energy Products improved, and Chemicals had a weaker year.
Let’s move on to the financial statements.
