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Each time I pass a gas station, I think of oil refineries and the companies that work hard to secure tenders in arguably hostile nations. These are the nations where the fidelity of contracts depends on the survival of the respective governments. The survival of these governments isn't something that I take for granted; neither do I take the success of oil exploration activities for granted. Nonetheless, major oil exploration entities have forged ahead, and have been bullish in securing contracts amidst all the chaos that unfolds each passing day in the Middle East.

The reason I am talking about the Middle East is because Exxon Mobil (XOM) is actively engaged in oil exploration in the Northern region of Iraq. The Kurdish north has been relatively friendly towards American companies, and it is also relatively peaceful when compared with the tumultuous and often violent south. Moreover, contracts that the Kurds agree to are not always held valid by the central government in Baghdad, down South. Nonetheless, oil exploration activities continue and the Kurdistan Regional Government announced that Exxon Mobil is committed to continuing its operations in the northern region.

Exxon Mobil has been bullish in Northern Iraq; Kurdish politicians have been supportive; so what is the problem? Well, Royal Dutch Shell plc (RDS.A) (RDS.B) has kept to its territory in the south, where it already has a $17 billion gas deal. The company chose to remain in the south and not race with Exxon Mobil and head towards the North, where it is relatively safer and more conducive for corporate competition. However, both Exxon Mobil and Shell want pieces of the North and the South, and both are willing to take the risks. While such competition can only be deemed healthy, in an Iraqi scenario it is not really so.

The Iraqi government in Baghdad isn't very fond of Kurdistan Regional Government, and the Shia-controlled government is opposed to Kurdish endeavors. Thus, many contracts that are approved in Kurdistan may become void eventually, when Baghdadi officials intervene. This puts the oil companies in a dilemma as they cannot offend either the Kurds or the Shias of the South. For instance, 3 of the 6 areas that Exxon Mobil wants to develop for oil exploration are disputed territories between Iraq and Kurdistan. Exxon Mobil may well be playing a very dangerous game, which might affect its stock in the coming months.

Even if the contracts work out in favor of Exxon Mobil, Shell and other players, the Iraqi government isn't strong itself, and there is a lot of fighting in the South. Should Exxon Mobil choose to compete with Shell in the South, it shall have to hire expensive security personnel, which would eventually prove to be very expensive. Exxon Mobil cannot afford to remain in its comfort zone in the Kurdistan region either. As the competition increases they will eventually have to find new regions to explore oil, and that includes the violent southern Iraq as well.

Of course, Exxon Mobil is a very well run company that has a great history to back its stock. Though it started as a small company, it has fared remarkably well after merging with Mobil in the 90s. With timely acquisitions, great PR and contracts that have withstood the tests of time, Exxon Mobil has been a reliable gas company to invest money in. However, recent skirmishes in Iraq and the bullish way in which Exxon Mobil has been playing in the region may affect its stock. When the company's pipeline broke in Yellowstone, it cost more than $135 million to clean up, and some of the obligations are still pending. Exxon Mobil has handled all these dents to its image remarkably well. When other companies like ConocoPhillips (COP) are cutting costs, Exxon Mobil is trudging ahead with risky exploration activities in Iraq. Though many have begun to feel squeamish about Exxon Mobil's risk-taking behaviors, I feel there isn't a better time than now to invest in the company's stock.

While it is difficult to compare related companies in terms of investment, the only company that I can think of that is doing really well other than Exxon Mobil is Chesapeake Energy (CHK). With a market capitalization of nearly $15 billion and with a price of $22 per share, Chesapeake Energy seems promising. If Exxon Mobil's shares have underperformed, it is mostly because of a fickle market that responds negatively to every skirmish that takes place on the streets of Baghdad or Basra.

A company that decides to stick to its guns and trudge ahead with its plans to explore oil in the most inhospitable regions of the world is the one that I would respect. If Exxon Mobil didn't have the courage to stick to the volatile Kurdistan region, or if it didn't consider exploring in the southern region of Iraq, I wouldn't have respected the company as much as I do today. While risky involvements are considered unwise in financial dealings, it is important to note that without taking risks it is impossible to surge ahead. This is something that the decision makers at Exxon Mobil clearly understand, and this is precisely what they have been practicing as well.

Moreover, the company has respected its obligations towards the environment and has cleaned up the mess that was left behind in Yellowstone. Not only that, Exxon Mobil is engaged in oil exploration activities in Colombia as well, which is yet another volatile region that many gas companies have tried to stay away from. The risky streak is clearly reflected in Exxon Mobil's environmental and PR dealings. The importance given to commitments and financial stability can be observed in the way they deal with foreign governments, no matter how volatile and dangerous the situation maybe. When investing my money, I look for a company that balances these essential qualities of adventure, risk-taking behavior, stability and commitment. Exxon Mobil is a prime example.

Source: Exxon Mobil: A Stock For Gains