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Exxon -2.9% on flat production forecast, Ukraine risks

  • Exxon Mobil (XOM -2.9%) is dropping more than at any time in the past year after it forecast flat production in 2014 on reduced capital spending.
  • However, RBC Capital's Peter Hutton isn't rattled by XOM's production guidance, noting that much of the downside has a relatively limited effect on cash flows and earnings as the production is in lower margin areas such as UAE and U.S. natural gas.
  • Also possibly weighing on shares is the potential delay of XOM's biggest non-U.S. exploration opportunity - XOM owns drilling rights to 11.4M acres of Russian land - if the U.S. hits Russia with sanctions over Ukraine; also at risk are plans to begin drilling in the Russian Arctic later this year in partnership with Rosneft and the lucrative Sakhalin-1 oil license off Russia’s Pacific coast.
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Comments (4)
  • Bob Carl
    , contributor
    Comments (258) | Send Message
     
    I bought more XOM today (another 1000 shares). I have been regularly buying $20,000 a month in XOM's investment plan but like to add on days like this.

     

    Anyone, who studies the 144 year history of The Standard Oil Company will recognize that over that period, the company, whose current name is Exxon Mobil Corporation, has had plenty of ups and downs, but has returned 9% per annum compounded over its history. I look for 7% total return from XOM over the very long run.

     

    Political instability in the Ukraine and Crimea and Russia is a concern and one can understand today's selling in that context. I am not concerned about the updated production forecast because of the long-term nature of energy business.

     

    Investors should remember that even if - and I think this highly unlikely - that XOM's holdings in Russia were nationalized - XOM would remain financially sound, with mostly equivalent cash flows, actually lower capital expenditure requirements, and more intermediate flexibility to increase dividends or buybacks. The company would increase its investments elsewhere in the world. Those investments would be less remunerative but also less risky from a geopolitical perspective.

     

    Fortunately, other than Sakhalin, Exxon's investments in Russia are mostly prospective and pending. And thus my bottom line conclusion is that the Crimean crisis is not a game changer for Exxon.
    5 Mar 2014, 03:04 PM Reply Like
  • User 23724223
    , contributor
    Comment (1) | Send Message
     
    Has much more to do with Jim Cramer's lemmings jumping off the cliff. XOM is totally solid, I bought more today and if it drops to 88. (as JC predicted) I'll buy a boatload.
    Patrick
    5 Mar 2014, 03:41 PM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (9770) | Send Message
     
    I tell you what, T. Rex and XOM had better make a significant bump in the dividend this year or shareholders are going to want to see a change at the top...
    5 Mar 2014, 06:42 PM Reply Like
  • dostoevsky228
    , contributor
    Comments (251) | Send Message
     
    The news just seems to get worse and worse. Now 2014 is a production "flatline" which bombed the stock 3%! Dividend increase is really a game changer as you say. Announcement of hike is usually right before next quarter release?
    6 Mar 2014, 05:51 PM Reply Like
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