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Archrock vs. Exxon Mobil: Which Energy Stock is the Stronger Bet?
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Key Takeaways
Archrock benefits from rising natural gas demand driven by the clean energy shift and LNG exports.
Exxon Mobil gains from WTI nearing $100, with strong upstream output in Permian and Guyana.
AROC trades at a premium valuation, reflecting investor bets on growing clean energy demand.
In the energy sector, the fate of almost all the companies is mostly tied to the prices of crude oil and natural gas. Oil prices are now back to the peak levels, and natural gas prices are also expected to rise, backed by cleaner sources of fuel.
Amid this backdrop, the billion-dollar question remains: among oil producers and natural gas compression service providers, which stock is better positioned in today’s business environment? To have a detailed insight, let’s do a comparative analysis of Archrock Inc. (AROC - Free Report) and Exxon Mobil Corporation (XOM - Free Report) .
Before delving deeper into the stocks, let’s take a glance at the price performance. Over the past year, XOM has surged 37.9%, outperforming AROC’s 30.1% jump.
One-Year Price Chart
Image Source: Zacks Investment Research
Archrock Continues to Bank on Rising Clean Energy Demand
To combat climate change, the world is gradually demanding cleaner fuel, which is boosting demand for natural gas. The increasing number of data centers across the globe requires massive amounts of natural gas-driven electricity. Mounting U.S. LNG exports reflect rising demand for the commodity from different corners of the world. Thus, the business outlook appears highly favorable for companies like Archrock, which provide natural gas compression services.
Investors should note that in its latest short-term energy outlook, the U.S. Energy Information Administration stated that it expects the natural gas spot price to be $3.76 per million BTU for 2026, higher than $3.53 per million BTU last year. Higher prices are likely to aid the gas exploration and production activities. This, in turn, will aid the demand for natural gas compression services.
Image Source: U.S. Energy Information Administration
High Oil Price & XOM’s Key Upstream Assets
The price of West Texas Intermediate (WTI) crude is again approaching $100 per barrel, according to data from oilprice.com, owing to the ongoing war in the Middle East. With XOM generating the maximum proportion of earnings from upstream operations, the crude pricing environment is highly favorable for XOM.
To have a glimpse of its upstream assets, XOM has a strong footprint in the Permian, the most prolific oil and gas play in the United States, and offshore Guyana. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries by up to as much as 20%.
In Guyana, XOM has made several oil and gas discoveries, further highlighting its solid production outlook. Record production from both resources has been aiding its top and bottom lines. In both resources, the breakeven costs are low.
Which Stock to Buy? XOM or AROC
Considering the backdrop, it seems that the business environment for both stocks is highly favorable. In terms of valuation, AROC appears relatively expensive, trading at a one-year median trailing 12-month EV/EBITDA of 9.30x, a premium to XOM’s 7.33x. Thus, it is clear that investors are willing to pay a premium for AROC to capitalize on the mounting clean energy demand.
View the Zacks #1 Rank List
Image: Bigstock
Archrock vs. Exxon Mobil: Which Energy Stock is the Stronger Bet?
Key Takeaways
In the energy sector, the fate of almost all the companies is mostly tied to the prices of crude oil and natural gas. Oil prices are now back to the peak levels, and natural gas prices are also expected to rise, backed by cleaner sources of fuel.
Amid this backdrop, the billion-dollar question remains: among oil producers and natural gas compression service providers, which stock is better positioned in today’s business environment? To have a detailed insight, let’s do a comparative analysis of Archrock Inc. (AROC - Free Report) and Exxon Mobil Corporation (XOM - Free Report) .
Before delving deeper into the stocks, let’s take a glance at the price performance. Over the past year, XOM has surged 37.9%, outperforming AROC’s 30.1% jump.
One-Year Price Chart
Archrock Continues to Bank on Rising Clean Energy Demand
To combat climate change, the world is gradually demanding cleaner fuel, which is boosting demand for natural gas. The increasing number of data centers across the globe requires massive amounts of natural gas-driven electricity. Mounting U.S. LNG exports reflect rising demand for the commodity from different corners of the world. Thus, the business outlook appears highly favorable for companies like Archrock, which provide natural gas compression services.
Investors should note that in its latest short-term energy outlook, the U.S. Energy Information Administration stated that it expects the natural gas spot price to be $3.76 per million BTU for 2026, higher than $3.53 per million BTU last year. Higher prices are likely to aid the gas exploration and production activities. This, in turn, will aid the demand for natural gas compression services.
High Oil Price & XOM’s Key Upstream Assets
The price of West Texas Intermediate (WTI) crude is again approaching $100 per barrel, according to data from oilprice.com, owing to the ongoing war in the Middle East. With XOM generating the maximum proportion of earnings from upstream operations, the crude pricing environment is highly favorable for XOM.
To have a glimpse of its upstream assets, XOM has a strong footprint in the Permian, the most prolific oil and gas play in the United States, and offshore Guyana. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries by up to as much as 20%.
In Guyana, XOM has made several oil and gas discoveries, further highlighting its solid production outlook. Record production from both resources has been aiding its top and bottom lines. In both resources, the breakeven costs are low.
Which Stock to Buy? XOM or AROC
Considering the backdrop, it seems that the business environment for both stocks is highly favorable. In terms of valuation, AROC appears relatively expensive, trading at a one-year median trailing 12-month EV/EBITDA of 9.30x, a premium to XOM’s 7.33x. Thus, it is clear that investors are willing to pay a premium for AROC to capitalize on the mounting clean energy demand.
Hence, the best bet now is AROC, which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Those who have already invested in XOM to gain from high oil prices can hold on to the stock. It currently carries a Zacks Rank #3 (Hold).