Will Recent News Hurt Exxon Mobil’s Stock?

| + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

With shares of Exxon Mobil (NYSE:XOM) trading around $95, is XOM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Exxon Mobil is a manufacturer and marketer of commodity petrochemicals like olefins, aromatics, polyethylene, and polypropylene plastics, as well as a range of specialty products. The company has a number of divisions and affiliates with names that include ExxonMobil, Exxon, Esso, and Mobil, which operate or market products in the United States and other countries. Exxon Mobil’s principal business is energy, involving the exploration for and production of crude oil and natural gas; manufacture of petroleum products; and transportation and sale of crude oil, natural gas, and petroleum products.

On March 5, Exxon Mobil announced that it would reduce capital expenditures this year after having “peaked” in 2013. Its 2014 spending will hit $39.8 billion, down 6 percent from $42.5 billion last year. While that may seem like a good thing (cutting costs), investors apparently didn’t like the idea; its stock price dropped 2.7 percent during midday trading as a result, ending the day as the biggest decline on the Dow Jones Industrial Average. Investors are growing concerned that Exxon may be running out of good projects to invest in. Exxon’s production was down by 1.5 percent in 2013 from a year earlier, and the firm believes it will only remain flat through this year. Meanwhile, Exxon’s costs on a per barrel basis are rising. It cost them $11.48 to produce a barrel of oil equivalent in 2013, sharply up from $9.91 in 2012 — but its troubles didn’t end there.

Although great uncertainty remains, Exxon may also suffer some damage from the unfolding Ukrainian crisis. Its biggest non-U.S. oil project is a collaboration with Russia’s Rosneft in the Arctic, where it has billions of dollars of investments at stake. If the U.S. and the EU slap sanctions on Russia for its incursion into Ukraine and its support for the pending referendum in Crimea, Exxon could face restrictions on doing business in Russia. This would endanger its plans to drill later this year. Exxon has the rights to drill on 11.4 million acres in Russia, which represent holdings for the company that are only surpassed by its acreage in Texas, its home state. Exxon CEO Rex Tillerson tried to assuage concerns at its annual meeting with analysts, saying that, “There has been no impact on any of our plans or activities at this point, nor would I expect there to be any, barring governments taking steps that are beyond our control.”

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business