We reaffirmed our Neutral recommendation on
) on Dec 12, 2013. We expect the commencement of key projects and
other expansion activities in 2014 to bear fruit. However, the
company's growth and returns picture is somewhat marred by a high
level of stockpiles that affect margins.
BLUEKNIGHT EGY (BKEP): Free Stock Analysis
HARVEST NATURAL (HNR): Free Stock Analysis
PACIFIC DRILLNG (PACD): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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ExxonMobil is the world's best run integrated oil company given
its track record of superior return on capital employed. As the
largest publicly traded oil company, ExxonMobil has long been a
core holding for investors seeking a defensive name with
continued dividend growth.
ExxonMobil is fairly active in its investment program. The
company plans to spend about $185 billion over the next five
years - up 29% from the last five-year period. The capex covers
as many as 21 important oil and gas projects currently on the
anvil and is estimated to generate over 1 million net
oil-equivalent barrels per day by 2016.
The key projects include the Kearl Oil Sands development project
in Canada, four in West Africa and Kashagan Phase 1 in
Kazakhstan. Exxon is also engaged in a large liquefied natural
gas project in Papua New Guinea. It will further unearth more oil
from the development of Hebron oil field, off the shore of
Canadian province Newfoundland and Labrador.
Exploration activities include unconventional natural gas across
North America as well as offshore regions, including the Gulf of
Mexico. Notably, Exxon achieved success in the exploration of a
well offshore Tanzania, where it came across a massive amount of
recoverable gas of high quality.
ExxonMobil is in excellent financial health and has an AAA credit
profile. With strong cash generation ability, the company is
consistently returning value to it shareholders.
We, however, remain skeptical due to the company's sharp drop in
refinery utilization rates during the third quarter. Owing to
lower crack spreads and narrowed crude oil differentials,
fortunes of refiners industry wide went southward. In the third
quarter, ExxonMobil's refinery throughput averaged 4.8 million
barrels per day (MMBPD), down 1.7% from the year-earlier level of
4.9 MMBPD. As a result, the segment recorded profit of $592
million against $2.6 billion in the year-ago quarter.
Stocks That Warrant a Look
While we expect ExxonMobil to perform in line with its peers and
industry levels in the coming months and advise investors to wait
for a better entry point before accumulating shares, one can look
at Zacks Ranked #1 (Strong Buy) stocks -
Blueknight Energy Partners, L.P.
Harvest Natural Resources Inc.
Pacific Drilling S.A.
), as good buying opportunities for the short term.