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There Are Promising Bits, But 2013 Could Prove To Be Challenging For The Oil Giant.

When Exxon Mobil(NYSE:XOM) reported its fourth-quarter numbers, shares only moved marginally. The company's earnings rose by 6% to $9.95 billion, or $2.20 per share, while revenues decreased from $121.6 billion to $115.17 billion.

Exxon's stock has been a laggard for a while, too. During the past year, shares are up a paltry 5%

Going forward, however, could Exxon Mobil be a smart investment? To see, let's take a look at the pros and cons:

Pros

Refining. This has been a bright spot for Exxon. The refining business has gotten a boost because of the growth in energy production in the U.S., which has depressed prices. The result is that refining margins have increased. During the latest quarter, the profits from the segment triple to $1.77 billion from $425 million in the same period a year ago. In fact, the strength in refining could continue for some time. After all, the U.S. appears to have plentiful amount of new energy sources.

Global Platform. To continue growth, Exxon needs to find massive deposit, which means taking a global approach to finding reserves. To this end, Exxon has promising developments in areas like Nigeria, Angola, Romania, Tanzania, Siberia, Argentina, Colombia and Kazakhstan. The company has also been aggressive in striking large partnerships, including a deal with Rosneft to explore the Russian Arctic.

Dividend and Finances. First off, Exxon's dividend yeild is a healthy 2.6%, and the company has a long history of increasing dividends and generates substantial cash flow. In fact, Exxon Mobil is one out of only four companies that has a perfect credit rating of AAA. If that isn't enough , the valuation for Exxon's shares is quite attractive; it's P/E ratio sits right above 9.

Cons

Oil and Gas Production. For the past few decades, finding new reserves is a task that has proven to be tough to accomplish, this is not just a problem for Exxon but also the other gas giants which include the likes of Chevron(NYSE:CVX), ConocoPhillips (NYSE:COP) and Royal Dutch Shell (NYSE:RDS-A). As for Exxon, the company reported a 5% decline in production for the quarter,and while it has been aggressively investing in exploration, it, unfortunately looks as if there will not be any major fields to come on-line during 2013.

Natural Gas. Even though prices have rebounded, there is still a glut on the market. The fact is that producers continue to generate large amounts of natural gas. Keep in mind that back in 2010, Exxon acquired XTO Energy for a staggering $41 million which was a top natural gas operator, and that has since been a drag on earnings.

Political Risk. In many cases, Exxon needs to find ways to work with governments that may be politically unstable. Risks of this include potentially higher taxes, regulatory roadblocks and even nationalization.

Verdict

Exxon essentially operates with an integrated model - that is, the company has businesses that are vertically integrated across the energy industry. Over the years, Wall Street has been somewhat skeptical of this approach … but it appears to be off-base. If anything, the integrated model has helped Exxon find ways to grow into a bigger company

However, as for 2013, the environment could be challenging. There will be no mega-projects that will boost production. And its other businesses - like refining and chemicals - will probably not be large enough to make up for the weakness.

In other words, the stock price may not have much momentum. So for investors, the cons outweigh the pros on the stock - at least for the next couple quarters.

Disclosure: I am long XOM.

Business relationship disclosure: This article was not written by me, I am not receiving compensation for it except from seeking alpha and I do not have any business relationship with any stock mentioned in this article