Exxon Mobil Does It Again

Friday morning Exxon Mobil (XOM) reported on its quarterly 2007 profits. While many oil companies moaned about rising oil prices, Exxon proved that $90 a barrel oil (and above) is not a bad thing for Big Oil profits. MarketWatch reports on the record profits for Exxon:

Exxon Mobil on Friday reported its most lucrative quarter ever, as profit neared the $12 billion mark on a slight rise in adjusted oil production, capping off a year of record crude-oil prices.

That's not to say that Exxon's profits couldn't have been higher. Exploration is becoming increasingly expensive for Big Oil (including Exxon, which spent 20 percent more in capital and exploration spending), as companies try to find untapped reserves of a dwindling resource.

But overall, Exxon beat the trends in some areas. In the U.S., refining and marketing business profit fell. But Exxon was one of the exceptions. Its R&M profit rose by $307 million. Exxon is also going against the trend in other areas as well. The company is notorious for refusing to invest in alternative energy, and for disregarding the environment. This seems to be working from a bottom-line standpoint. And don't forget that economic stimulus, if it does come, is likely to help oil prices rise again.

Additionally, Exxon is seen as having good value. Its share price is well below $90, offering good valuation. And it's still falling this morning. It might be a good time to buy XOM -- if you don't mind supporting a company with a horrible environmental record.

Disclosure: I do not own Exxon stock.

Comments

[Ronmac:]

I know the perception is that they have a bad environmental record, but they are an oil company with the objective to find oil and to turn a profit.
Due to the size of the company and the scrutiny they operate under, if they are violating environmental laws, I am sure there are a number of whistle blowers out there to turn them in, as they should.

2008 Feb 05 06:13 PM

[Mmarrkk:]

The author states that Exxon has a "horrible environmental record". Could she please state exactly where that comes from? With the exception of the Valedez spil, which was a long long time ago and due to a captain's error, not the company's, can she name one other spill or accident?

BTW, failing to invest in alternative energy is not part of a "horrible environmental record". XOM is an oil and gas company, so why should they invest in something other than oil and gas??

2008 Feb 06 09:36 AM

[Miranda:]

Perhaps I should have said that they have a record of not caring about improving its environmental record. Officers of Exxon have made that very clear (one example: money.cnn.com/magazine...)

You're right. XOM doesn't have to try and promote better environmental practices. But for investors who care about that sort of thing, simply meeting minimum standards and efforts to avoid paying for the damages it caused in the Valdez spill equals a horrible record. (Just because a company meets the absolute minimum required by law, and just because a company isn't breaking any laws doesn't mean its doing any good; it just means it could -- and probably would -- be doing worse.)

After all, what you consider horrible is subjective. And that is my point. If profits are ALL you care about in a company, Exxon is the way to go.

2008 Feb 08 05:38 AM

[Mmarrkk:]

AVOID PAYING FOR DAMAGES IN VALDEZ SPILL????? Are you serious? XOM paid billions in cleaning up the damage and repairing the damage. So I find it very hard to say they have avoided paying. The billions they spent were spent immediately, at very high price levels in an emergency. Now, I know you are referring to their appeals of the questionable court judgement against them. So I guess what you are saying is that "using the legal system to appeal a ruling you believe is wrong" is avoidance. I kind of think its called exercising your rights under the US justice system. Here's the deal: XOM thinks the ruling is wrong and they appeal and they have won on appeal. You (or others) believe the ruling is right. How do we settle that? we go to court. The courts have decided that XOM's appeals have enough merit to continue considering them. So XOM continues to pursue a legal remedy spelled out in our legal system. But if you don't like the appeals process, maybe you'll change your mind if you are wrongly accused of something and a group of soft hearted jurors find against you.

BTW, I don't work for XOM, never had and I don't own shares in XOM at this time.

2008 Feb 08 10:35 AM

[Miranda:]

I don't have an issue with them going to court. It's their right. They should be able to appeal what they consider questionable. I just don't agree with them. That's what opinions are for.

I don't agree with the "values" of XOM, in the sense that they don't see beyond profit and obeying the letter of the law and the minimum required in circumstances. Yes, XOM did what was necessary at the time. But no more than that. Going to court, while it is their right, and I think it's fine for them to do it, is a way of avoiding "going the extra mile."

But that's my opinion. I agree that XOM is a good investment choice, but I don't like the way they do things, so I won't invest in the company. You disagree. And you will probably make more money than me if you decide to invest in XOM at some point.

2008 Feb 08 12:24 PM

[EJ:]

I think if you do some homework you'll find that ExxonMobil actually has a very strong environmental (and safety) record...

2008 Mar 11 06:36 PM