4. Russia, Russia, Russia
Another issue that could present itself during XOM’s latest earnings release is the fate of its Russian holdings. In retaliation for invading the Ukraine, the U.S. and EU has placed a series of sanctions on Russian interests and the latest round of these government sanctions could put the entire project in jeopardy.
The U.S. Treasury Department has essentially blacklisted Igor Sechin. Aside from being a top advisor to Russian government and the nation’s main energy mastermind, Sechin is also the CEO of stat-owned integrated oil giant Rosneft (OJSCY). That’s a big deal as XOM’s main partner in the nation is Rosneft and drilling in the Arctic was set to begin this year.
As the latest round of sanctions where announced, President Vladimir Putin basically said that the state would have to reevaluate energy deals with U.S. and European companies. Cutting ties if necessary. Aside from the potential $900 billion loss in future energy revenue from drilling in Russia, XOM could be out of some serious already spent CAPEX. Russia does have a history of nationalizing foreign assets and the Exxon has spent around $600 million in the nation to begin tackling its energy reserves.
5. XOM Stock May Pop on M&A News
Finally, investors should look at XOM’s cash balance when it releases earnings. As we said before, it’ll take some serious reserves to move the needle at the integrated giant. In order to do that, XOM may open up its wallet. Already, the firm has bought smaller shale and rivals in recent years, but it hasn’t made a huge purchase since XTO back in 2010.
With the recent CEO departure at British Gas (BRGYY) and Anadarko’s (APC) recent lawsuit win, both firms are said to be on the auction block. It’ll take a giant like XOM to do the deal. Any hint that XOM has an unusually large cash balance or bond sale announcement could mean that Exxon is ready to strike. As of last quarter, XOM had about $5 billion in cash on its balance sheet, but its hefty cash flows could support raising debt to purchase a larger rival.
The Bottom Line
For Exxon Mobil and XOM stock investors, its latest quarter should be another average report. Nothing too great, nothing too bad. But that’s exactly what one of the world’s biggest energy stocks should deliver. The key takeaways is that XOM may finally be seeing some much needed production gains on the oil front. That will be great news if oil prices can continue their march higher into the second quarter.
The real wildcard will be Russia and potentially a higher cash balance signaling a big buy is coming.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.