Markets
SOL

ExxonMobil's Balanced Operations Likely to Fuel Growth

On Oct 1, 2015, we issued an updated research report on ExxonMobil CorporationXOM .

ExxonMobil is in excellent financial health and has an AAA credit profile. The company's free cash flow generation remains strong, and it keeps returning value to its shareholders. ExxonMobil has steadily raised its dividend, which currently stands at an annualized $2.76 per share. The company also engages in regular share buybacks.

The company has diversified operations across the world and several of its new projects are expected to come online through 2015. Though ExxonMobil boasts a global presence, the main areas of its focus for new volumes over the coming years are the U.S., Canada, Kazakhstan, West Africa, Australia, Russia, Angola and Iraq. On the exploration front, it concentrates on 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 in offshore Tanzania, where it came across huge amounts of recoverable gas of high quality.

Exxon's strength lies in its balanced operations, strong financial flexibility and continuous improvement on efficiency and cost control. The company's efforts to build an unconventional resource portfolio both in North America and overseas should increase production through wider exposure to large energy resources with long reserve life and low field declines.

However, given its large asset base, achieving growth in oil and natural gas production has been a challenge for ExxonMobil over the past several years. With the established oil-producing regions of Europe and North America well beyond their prime, the search for growth has pushed the company into riskier regions. As a result, the share of production coming from Qatar and West Africa is on the rise.

Moreover, ExxonMobil continues to lower capital spending to tackle the weak pricing environment. Despite such measures, however, the company's free cash flow position is likely to come under pressure, which may affect dividend and share repurchases going forward. The company already cancelled its share repurchase program twice this year.

Access to new energy resources is becoming increasingly difficult. Therefore, ExxonMobil, like most of its peers, will likely face headwinds to replace its reserve.

Other threats include government regulations and weather conditions, as well as renewable fuel prices. These can result in increased costs, reduced growth and fines or other sanctions.

Zacks Rank and Stocks to Consider

ExxonMobil carries a Zacks Rank #3 (Hold). Some better-ranked players from the same space are Cobalt International Energy, Inc. CIE , Matrix Service Company MTRX and ReneSola Ltd SOL . All these stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MATRIX SERVICE (MTRX): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

RENESOLA LT-ADR (SOL): Free Stock Analysis Report

COBALT INTL EGY (CIE): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SOL XOM MTRX

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More