Shares of ExxonMobil Corporation ( XOM ) hit a 52-week low of $86.60 on Dec 12. The fall came after West Texas Intermediate (WTI) crude dipped further when oil fell to levels of around $57 per barrel, the lowest since Jul 16, 2009.
What Led to the Share Price Decline?
It has been an over-supplied oil market especially in the face of lackluster global demand. Plentiful supply of shale oil owing to shale revolution in the U.S has been dragging the WTI crude prices since August this year. On top of that, the international cartel of oil producers' - Organization of the Petroleum Exporting Countries (OPEC) - decision against an oil production cut made the price fall to around $40 per barrel and added fuel to the persistent slide on the bourses.
Moreover, Morgan Stanley - a U.S. investment bank - recently declared in a report that oil price may fall further in 2015.
These dealt a blow to ExxonMobil which has extensive upstream operations. The exploration and production activities especially in the weak crude pricing scenario are not profitable. Hence, investors reacted negatively and the share price of the company fell.
The weak crude pricing environment during July to September this year also affected ExxonMobil's third-quarter results. The company's Upstream operations reported quarterly earnings of $6.4 billion, down $297 million year over year. The decrease stemmed from lower realizations, partly compensated by a favorable volume mix. Production averaged 3.831 million barrels of oil-equivalent per day (MMBOE/d), down 4.7% year over year. Liquid production decreased 6.1% year over year to 2.065 million barrels per day.
ExxonMobil currently has a Zacks Rank #3 (Hold). Better-ranked players in the energy sector include Sandridge Mississippian Trust II ( SDR ), Seadrill Partners LLC ( SDLP ) and InterOil Corp. ( IOC ). Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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