Is Exxon Mobil Corporation (XOM) Stock Worth Your Money Anymore?

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You can say this much for anyone who’s stepped into a new position in Exxon Mobil Corporation (NYSE:XOM) this week — they’ve got guts. With XOM stock rekindling a downtrend that got started at the beginning of the year that’s carried it to within sight of a new 52-week low, most onlookers are fearing the worst.

Is Exxon Mobil Corporation (XOM) Stock Worth Your Money Anymore?

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Maybe they’re right to be concerned, and not just for technical (chart-based) reasons. After all, not only is Exxon stock fighting a losing battle, the company is getting pretty aggressive with its growth initiatives.

That doesn’t come cheap.

Sure, the spending will look brilliant if the price of crude oil and natural gas remains in a long-term uptrend. If that’s not how things take shape in the foreseeable future though, Exxon Mobil will be right back in the trouble it was in just a few quarters ago.

The recent weakness from XOM stock says investors aren’t looking to take any chances.

A Lot Going On With Exxon Stock

In the grand scheme of things, it no longer seems entirely crazy for an oil giant to play offense rather than defense. Crude prices, though still volatile, are still up more than 80% from their early 2016 low. And, the Energy Information Administration expects West Texas Intermediate crude prices to average $52.20 per barrel this year, and $55.10 per barrel next year. OilPrice.com just reported Exxon Mobil’s breakeven price last year was just under $40 per barrel, so there’s plenty of room for Exxon to make money.

There are limits to how much the company may want to bite off, however, and Exxon Mobil CEO Darren Woods may want to temper some of the missions he’s on.

Case in point: XOM is exploring several ways to tap into Brazil’s oil-rich resources, aiming specifically at the area’s deepwater prospects. This effort could lead to a joint venture with state-owned Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR, NYSE:PBR.A), or even take sides with Hess Corp. (NYSE:HES) to set up shop in Brazil, which has recently become more inviting of outside investment.

At the same time, the company is moving ahead with a $10 billion petrochemical plant plan, to be located in Texas. It, along with Saudi Basic Industries (you know it as SABIC), intend to work together to make ethylene, which is used in all sorts of industrial goods, many of which have nothing to do with oil or gas.

The buzz is that the company is mulling the purchase of a similar petrochemical plant in Singapore.

Exxon Mobil has been busy drilling in Guyana too, reporting last week its third major find on the country’s Snoek area. Finding crude is good. That’s what explorers are supposed to do. Exploring isn’t cheap though. Neither is the development of the infrastructure or the placement of equipment necessary to extract it.

And then there’s this week’s rumor that XOM is looking to rekindle the joint venture it had going with Russia’s PAO Rosneft in the Black Sea. Sanctions against Russia had put the kibosh on the team effort, but Exxon Mobil is reportedly seeking a waiver to get around that hurdle.

The PAO Rosneft is clearly a better-developed opportunity than Guyana’s Snoek find, and would likely produce revenue well before the Texas petrechem facility would. What the partnership lacks in operational risk, however, it makes up for in political risk.

The point is, at a time when many other oil companies — even the majors like ConocoPhillips (NYSE:COP) and Chevron Corporation (NYSE:CVX) — are exploring the sale of assets to optimize their operations, Exxon Mobil is being awfully aggressive. The aforementioned projects are just a recent sampling of the company’s expanding operations. One can’t help but wonder if the company is putting too much on its own plate. If so, owners of XOM stock could be the ones to pay the bulk of any price.

Bottom Line for XOM Stock

Don’t read too much into the caution. Though Exxon Mobil is sitting on $28.9 billion in debt, on a relative basis that’s not an unusual level of fiscal obligation.

On the other hand, while everyone else is doing what they can to reduce their debt levels, it’s noteworthy that Exxon’s continues to grow. Only time will tell if it’s a decision that comes back to haunt the company. If it does though, it could hurt … bad.

More than anything though, the risk XOM is running is primarily one of distraction. What new CEO Darren Woods calls being “nimble” may actually be a case of being unfocused. It couldn’t hurt to take the helm for a year or so, and get the basic things running right before throwing any new spaghetti on the wall.

Just a thought for current prospective Exxon stock owners. That said, the decided weakness since the beginning of the year says most traders are already harboring some sort of concern.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/04/exxon-mobil-corporation-xom-stock-worth-money-anymore/.

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