Recently, Exxon Mobil (XOM) announced its intentions to partner with ConocoPhillips (COP), BP (BP) and the Alaska Pipeline Project to work toward commercializing the North Slope natural gas resources in Alaska. There is a huge amount of unutilized natural gas resources in Alaska, and Exxon is a forerunner in the move to find new energy sources such as this in order to meet the ever rising demand for energy.
A development that may work in favor of Exxon is the recent decision of the Russian government to cancel the export tax for new shelf projects. This will directly benefit Exxon's activities with Rosneft in the Arctic region by boosting the profits earned from this endeavor.
A dispute that Exxon has somehow managed to get into the middle of is between the Baghdad and Kurdistan governments. The underlying problem here is that Kurdistan is a semi-autonomous state that has been in conflict with Baghdad regarding oil rights in their respective regions for a long time. Recently, the government of Baghdad went as far to declare any foreign contracts made with Kurdistan regarding oil will be deemed illegal. As Exxon has existing contracts with Kurdistan in this regard, tensions flared with Baghdad vowing to put an end to all such agreements. The long-term ramifications of this have caused unrest in the minds of many stockholders, especially as the area continues to be a volatile one for American investment.
More recent news has revealed that Baghdad may be willing to respect these existing agreements to a certain degree. The conditions imposed on this concession are, among others, that Exxon will be allowed to remain in the region provided that it does not start any new work on the ground, and that the three oil blocks in disputed territory will not be open to Exxon's activities in the region. The matter is far from being officially resolved and raises questions regarding whether or not this resource will remain open to Exxon for an extended period of time. There also seem to be some indications that Exxon will no longer be licensed by Baghdad to function in the area in the near future. The situation in Iraq and the ramifications it has on the oil drilling activities of Exxon are extremely important ones to monitor as they have a direct impact on the future success of the company ,as well as its success in this part of the world. As things stand it is difficult to know where this situation will lead.
Exxon's top bosses have recently received a lot of mixed press. For example, there seems to be a lot of focus on the huge increase Exxon's CEO received last year. The compensation will not hurt the company financially, but it risks more bad publicity for a company in an already tumultuous industry.
Less cynical investors could choose to view these increases in a positive light rather than as a mismanagement of funds. For example, the increase received by CEO Rex Tillerson was justified by Exxon as being due to Tillerson's actions that resulted in "boosting returns to shareholders." It is also known that last year was one of the company's best financial years to date, so perhaps the raise was entirely earned. If the reasons for the raise are merely congratulatory, it as an indication that Exxon is doing well and that it remains a viable stock option.
What is harder to positively reconcile with the success of the company is the recent increase in the personal use of company airplanes by CEO Tillerson. Exxon stresses that this increase is necessary as well as acceptable, but the news has still gained a lot of attention from investors who feel that this may be an indication that the company is not using resources wisely.
Whatever the reasons for the questionable benefits Tillerson has received, the fact is that this kind of media coverage does tend to raise a few eyebrows and the long-term effects it could have on the company may be far from positive. Again, this is a matter worthy of close monitoring and consideration.
The CEO benefits are hardly exclusive to Exxon. Competitor Chevron (CVX) CEO John Watson took home an enormous salary in 2011, at a time when his company is fighting a monstrous legal case involving environmental damages in the Ecuadorian rainforest.
Another thing that may be standing in the way of Exxon Mobil's success is the recent energy bill proposed in Florida. Exxon is in the process of attempting to crush the bill and thereby maintain its strong presence in the area. This may not necessarily be the wisest move on Exxon's part. Because the bill that Florida wishes to pass is likely to provide energy at lower prices for consumers, create jobs, and work toward increased reliance on sustainable and alternative energy sources, fighting the bill could easily be perceived in a negative light by consumers and therefore have a potentially bad effect on Exxon stock. Although Exxon argues, among other things, that should the bill be passed millions of jobs will be lost, the bottom line is that the bill seems to be in the best interests of the country.
Exxon is not the only company fighting for itself in Florida though. Competitor BP is battling the state's attorney general over a large monetary settlement over its 2010 Gulf of Mexico oil spill. Clearly, the region, and the state of Florida, is still holding a grudge toward the oil industry at large for past indiscretions and damages.
There are several indications that Exxon may be losing its market power as well as several indications that its future endeavors are in jeopardy. It is too soon to make a decision about the viability of Exxon, especially considering the several positive aspects still in its favor. With that said, Exxon is a large and powerful corporation with a long history of success. If there's a company that will weather the oil industry's storm, it probably will be Exxon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.