Exxon Mobil: New Opportunities Reveal A Silver Lining For Investors

Aug.23.14 | About: Exxon Mobil (XOM)


Exxon Mobil is developing more than 120 projects that represent about 24 billion oil-equivalent barrels of oil and gas.

LNG project is expected to produce more than nine trillion cubic feet of gas over its estimated 30 years of operations and exemplifies Exxon Mobil's leadership in project execution.

The company reported EPS of $2.305, or $8.78 billion, an increase of 32 percent year over year.

Exxon Mobil Corporation (NYSE:XOM) is the world's biggest incorporated oil company, or IOC. In 2012, it made revenues in excess of $420 billion and approximately $45 billion in earnings. Like most other IOCs, it earns revenues primarily from exploration and development activities throughout the world. Around 28% of the company's revenue is generated from U.S. activities. Exxon Mobil has a diversified production mix - half of its total production comes from crude oil with the remaining half coming from natural gas.

In assessing the strength of the company, CEO Rex Tillerson notes that its balance and diversity give Exxon Mobil a fundamental competitive advantage.

"Resource and geographic diversity across the portfolio enables us to mitigate risks in a dynamic market environment and maximize profitability through changing business cycles."

Exxon has been in a bull market since April 2010 when it traded in the mid $50s. With the exception of a major 2011 drawdown, the trend has been mostly smooth as the stock rallied to its recent price near $104. That may not be much of a move for a biotech stock, but for a behemoth of this size, it was a very impressive advance.

The Board of Directors of Exxon Mobil Corporation declared a cash dividend of 69 cents per share on the Common Stock, payable on September 10, 2014 to shareholders of record of Common Stock at the close of business on August 13, 2014.

Recent Accomplishments and Projects

Despite sanctions imposed on the Russian company by Washington over the crisis in Ukraine, U.S. oil giant Exxon Mobil began drilling for oil in Russia's Arctic on Saturday, August 9, 2014, its partner Rosneft said. Exxon Mobil is heading forward with their Arctic drilling dream on the presumption that the U.S. and EU sanctions on Russia are primarily addressed to the political showground and in no way they are going to affect the transnational business proportions. Exxon Mobil and Rosneft are swept away by the Moscow sized Arctic oil reservoir that is worth hundreds of billions of dollars. However, adverse effects of sanctions are registering effects in Germany, Britain, Italy, France and other European countries. Greenpeace is also demonstrating against the Arctic drilling. If Russia's international politics become volatile, investments in Exxon Mobil may prove a rough ride.

Exxon Mobil is developing more than 120 projects that represent about 24 billion oil-equivalent barrels of oil and gas. These include a liquefied natural gas project, LNG, in Papua New Guinea to develop some 9 trillion cubic feet of gas for the energy-hungry Asia-Pacific region, and nine other major projects that Exxon Mobil has either begun producing or plans to bring on-stream this year. During the next three years, production at another 11 major projects is likely to commence as per company projections. Consequently, one million net oil-equivalent barrels per day of production capacity by 2017 is also anticipated. Enhanced income in projects like this can allay out of the blue bumps during the production processes of oil in the arctic Kara Sea.

The company shipped the first cargo of liquefied natural gas from the Papua New Guinea U.S. $19 billion LNG project ahead of schedule to Japan for Tokyo Electric Power Co. Inc. (TEPCO). The LNG project is expected to produce more than nine trillion cubic feet of gas over its estimated 30 years of operations and exemplifies Exxon Mobil's leadership in project execution. Presently, gas will be exported as liquefied natural gas to customers around the world. The project is running at full capacity and will produce 6.9 million tonnes of LNG per year. This project is Exxon Mobil's co-venture with Oil Search Limited, National Petroleum Company of PNG, Santos Limited, JX Nippon Oil & Gas Exploration Corporation, Mineral Resources Development Company (representing landowners) and Petromin PNG Holdings Limited. Hence, would remain an attractive business for the investors.

The steam cracker will have a capacity of up to 1.5 million tons per year and provide ethylene feedstock for chemical processing at two new 650,000 tons per year high-performance polyethylene lines at the Mont Belvieu plastics plant. Exxon Mobil Corp. reported the startup operations of one of the world's largest ethylene steam crackers, which is the centerpiece of the company's multibillion dollar expansion project at its Singapore petrochemical complex. So during the month of June 2014, share price rose by 1.7% for two consecutive sessions to touch $104.38 per share.

Exxon Mobil's venture CLOV is located 87 miles offshore Luanda. CLOV is one of the most inexhaustible fields. It comprises 34 wells and 8 manifolds. The Cravo-Lirio-Orquidea-Violeta (CLOV) project will produce through a new floating production, storage and offloading vessel in 4,100 feet of water. An Exxon Mobil partner has a 20% working interest in CLOV. The project will produce oil from the four fields of Cravo, Lirio, Orquidea and Violeta that lie in water depths of 3,600 feet to 4,593 feet. On commencement of production two months back, share price rose nearly 1% on the company's announcement that its CLOV venture in Angola has started operations on time and is expected to attain daily production capacity of 160,000 barrels within a short time.

The Lucius oil field is located in the Keathley Canyon block in the Gulf of Mexico. Anadarko Petroleum operates the field with a 35% working interest. Co-owners include Plains Exploration & Production Company (23.3%), Exxon Mobil Corporation (15%), Apache Deepwater (11.7%), Petrobras (9.6%) and Eni Petroleum (5.4%). The Lucius field will have daily production capacity of 100,000 barrels of liquids and 150 million cubic feet of natural gas. To the south of Lucius, production capacity for the Hadrian South project, of which Exxon hold a 47% stake, will be a propos 300 million cubic feet per day. Hadrian South will be linked by pipeline to the Lucius production platform. Both projects are in some 7,000 feet of water.

Financial Highlights and Company Outlook

Exxon Mobil distributed $6 billion to shareholders in the second quarter of 2014, including $3 billion in share purchases to reduce shares outstanding. The company reported earnings of $8.78 billion, increasing its bottom line by $1.92 billion year over year. Earnings per share were $2.305, an increase of 32 percent.

Investors must take into account that Exxon is subject to risk in Russia and the Middle East, among other regions. Likewise, fate of investments in XOM is subject to conditions affecting supply and demand of Exxon Mobil products. Exxon Mobil's business fallout is furthermore open to the elements of potential negative or positive impacts owing to interest rate fluctuations, inflation, money exchange rates, and myriad local or regional market situations. However, Exxon is in a position to capitalize on the possibility that regional issues do not escalate and future projects are able to push for increased production.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.