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Exxon Mobil (XOM) is a market leader in an integrated oil industry that is synonymous with competition. With its $404 billion market cap and $57 billion in operating cash flow, it is in a strong position when compared to formidable competitors like BP (BP) and Chevron (CVX). Chevron currently has a market cap of $204 billion and $39 billion in operating cash flow, while BP has a market cap of $136 billion and $23 billion in operating cash flow. Exxon displays a strong cash flow statement and has a lot of growth potential. I believe that a lucrative stretch of investment opportunity lies ahead for this heavyweight.

In the oil industry, expansion to strong markets ultimately extends the much-needed edge. This is exactly what Exxon has managed to achieve. It has widened its portfolio to accommodate the several billion barrels of oil in Russia. These barrels are a product of Exxon's partnership with the Russian-based Rosneft (OTC:RNFTF), through which the two will explore and extract from formations in the Black Sea and Deep Arctic, north of Russia. Specifically, the South Kara Sea could have 40 billion barrels of oil underneath its seabed. Few of Exxon's rivals have the technology to extract a reasonable quantity of that estimate at realistic pressures and production rates, notwithstanding the finances each would need. Moreover, in particular South Kara projects would need significant piping infrastructure to get oil, natural gas and gas liquids to transport hubs along Russia's coast.

One overlooked point about the Russian deal that acts in the advantage of Exxon is the fact that Exxon was able to muscle out BP. Indeed, Rosneft needs a liquid, reliable and cash flow-heavy partner to orchestrate what could eventually turn into a multi-year, multi-billion dollar series of projects. Initially, BP had a firm grip on the deal, and the final arrangements were on the verge of completion. It, however, had a dispute with influential oil kingpins in the country, Alfa Access Renova, led by billionaire Mikhail Fridman. An aggressive Exxon seized the deal. In turn, Mihail recently resigned from his post at TNK-BP, the existing joint BP-Alfa venture. The BP deal fell through likely because of pressure for a share swap (Rosneft and AAR wanted a piece of BP itself). However based on Alfa's desire to complete a deal with Exxon, it agreed to a 30% stake in three North American projects. I am confident that it will do well in the Russian market, as the 30% stake acts as a hedge. Without it, there would be significant incentive for AAR to attempt to whittle away Exxon's stake in the deal, whether directly or through political means like less favorable oil extraction taxes.

Stateside, Exxon has its own government with which to contend and in that effort it filed a lawsuit against the U.S government. The lawsuit stemmed from a denial by the U.S. to suspend production in the Julia oil field. When Exxon's leases expired in 2009, the government cited a "lack of commitment" due to the company's suspension request. Exxon court documents stated, "Cancellation of the original Julia leases would give Interior the opportunity to collect millions of dollars in bonuses and royalties that it otherwise would not be entitled to collect." Interior, in an effort to capitalize on drilling acreage royalties, is pushing the most it can get out of leases.

Huge Gas Reserves Discovered in Israel

Just recently, Israel's record gas discovery came to light. This gas reserve has an estimated capacity of 122 trillion cubic feet. This is roughly enough to serve the whole world for at least one year. This development has been politicized, and I believe that politics could delay any significant projects. If this happens, Exxon could have a possible entry point into this promising market as the Israel government may start looking for private contractors beyond ATP Oil & Gas (ATPG), which is drilling in the Levant Basin. Exxon will face formidable competition in its bids, especially from European oil companies such as Royal Dutch Shell (RDS.A). Successful expansion in the region will greatly increase the earnings per share and more shareholders will be holding rather than selling.

A number of factors work against Exxon, but they are largely governmental. Growth is likely not one of Exxon's most immediate concerns. Thus, I believe the company's strong fundamentals and predominant tendencies overshadow its drawbacks.

Source: Exxon's Rosneft Deal Will Reward Investors In 2013