ExxonMobil (XOM) is one of the largest oil producers in the U.S. Although most of the oil-producing companies have been unable to record grown in profits and revenues, Exxon is still optimistic about its growth in the future. The confidence of the company is based on the fact that it would be increasing production in various global projects in various countries like Canada, Iraq, Argentina, and Russia. It also plans to increase the drilling activity for untapped shale oils fields in the U.S.
A Look at Exxon
Exxon recently reported its fourth-quarter earnings, which weren't quite impressive. Production decreased by 1.8% while profits slid by 16% from last year. The company posted net income of $8.35 billion down by $1.6 billion as compared to $9.95 billion a year ago. Even on the annual basis, the earnings for fiscal 2013 were reported as $32.6 billion that again was down by 27% from fiscal 2012.
Exxon has been incurring huge expenditures on shale oil projects and has spent over $52 billion in the past three years. The major part of this expense was involved in the year 2012, when gas prices slumped to 10-year lows. Exxon is confident of increasing its output by 74% from the start of the year to over 60,000 barrels a day in the Bakken formation, but weak pricing could undo this increase.
Exxon is focused on its overseas projects in Canada, Australia, and Russia, with some of its projects based in the Caspian Sea. Exxon is also targeting various shale oil projects in China, which could be undertaken as joint ventures with various Chinese oil companies. The only barrier to shale oil projects in China could be the lack of infrastructure support in China as compared to facilities in the U.S.
Exxon also sees huge potential in Siberia. To exploit this opportunity, it has tied up with Rosneft to jointly explore all the possibilities of shale oil potential in the western Siberia region. Exxon anticipates that it may take around a year to explore all the possibilities and viabilities of the shale oil deposits in this area. Exxon has also tied up with Rosneft for shale oil exploration in some areas of Canada and Texas. This tie up with Rosneft can help Exxon increase production further in the future.
Recently, Exxon made a good hit by discovering a massive gas source in Tanzania and this was a joint operation with Statoil (Norwegian Company). Exxon also announced a liquefied natural gas plant in Alaska.
The company is all focused on cost cutting to influence its margin. This year, it plans to reduce capital expenditure by 6% and increase the production by 2% to benefit margins.
The company’s outlook for expense this year is around $39.8 billion as again $42.5 billion last year. The company believes that average spending would be less that $37 billion from 2015-2017, provided it does not make any major acquisitions.
Exxon also plans to start production at 10 various projects this year.
Analysts are expecting better growth in Exxon's earnings as its forward P/E comes down to 11.95 from a trailing P/E of 12.41. Analysts expect Exxon's earnings to grow 6.70% next year. With global expansion plans to increase production and various cost cutting measures we should see a ramp up in margins of the company that makes it a good investment for the long run.