ExxonMobil Corporation (XOM, Financial) is suffering from a proverbial oil spill with its finances in tatters in the current quarter. One of the world’s leading oil production companies, ExxonMobil has taken a strong hit in the stock market with share prices hitting a record low. While the company’s finances are directed heavily towards research, analysts are giving the oil conglomerate a low rating due to bad cash inflow. Only analysis of how bad the financial turmoil is will give us a clearer picture.
Stock talk
Exxon Mobil dropped -1.01 points or -1.15%, trading negatively at $86.57. The composite uptick value reached $93.15 while the total downtick value hit $76.96. A positive money flow indicates the market is still bullish about the company. Exxon Mobil encountered a rise of 13% in the short positions with the number of shares escalating to 44,220,272 in January 2015.
Beginning from the start of this quarter, Exxon Mobil share prices have dropped from $1.58 to $1.33 leading up to the company’s fourth quarter announcement on February 2, 2015. This drastic drop in share prices has led analysts to become completely bearish over Exxon Mobil.
Financials
Exxon Mobil, the established oil conglomerate, produces and sells crude oil, natural gas and petroleum products. Yet hard times seem to have arrived for the company with analysts predicting a 21% Year-on-Year drop in revenue to $87.58 billion for this quarter. Exxon Mobil’s yearly revenue is predicted to hit $413.06 billion.
A victim of fall oil prices, Exxon Mobil’s decline is the result of oil prices falling 55% since June even as country officials from Iran and Venezuela tried convincing OPEC to cut production amid dropping prices. Exxon Mobil did however manage to perform above the industry average. Oversupply is the reason behind sinking oil prices and the main reason behind why Exxon Mobil suffered from successive 52-week lows.
Having recently been downgraded from ‘neutral’ to ‘underperforming by Credit Suisse (CS, Financial), Exxon Mobil were given a lower rating due to the fact that after the current oil price recession oil companies will have much less production, lower cash inflow and more debt than projections made six months ago. This led to Credit Suisse’s EPS estimates hitting $6.88.
Spilage at Exxon Mobil
The oil company was fined a hefty $1.05 million penalty by federal regulators for safety violations leading to a 2011 pipeline break near the Yellowstone River. The pipeline was stressed to breaking point amid changing weather conditions and spilt over 1500 barrels of oil into the river and downstream. The company had since taken full responsibility for the incident, paying the local government for manpower hours and settling an out of court settlement of $2 million after the oil spill affected drinking water supplies for the nearby town.
Street talks
The falling oil prices are expected to bounce back with predictions suggesting negative effects for the industry may be overplayed. Big companies such as Exxon Mobil will struggle to find access to credit in such turbulent economic conditions. Herein lays the opportunity to enhance efficiency in oil production. Analysts predict the oil industry’s need to invest huge sums of money as they expect the demand for oil to skyrocket by 2030.
Initially oil prices started to drop since September 2014. The level of drop became steep in October however with crude oil prices hitting $90.74 on October 1. By the end of December, prices of oil barrels plummeted to $55. Aside from the price drop, production was affected negatively with oil prices being devalued and production witnessed downward pressure.
Exxon Mobil forecast a 35 percent increase in total energy demand by 2040. Near January 2015, Exxon Mobil fell to second place behind Brazil’s Petrobras (PBR, Financial) in terms of crude oil petroleum production. The company has its interests in mind and future fairly secured by investing heavily in clean energy, synthetic lubricant technologies and enhanced production of Hydrocarbons.
Exxon Mobil Corporation manufactures and markets commodity petrochemicals, including olefins, aromatics, plastics as well as speciality products. The Company has various divisions such as ExxonMobil, Exxon, Esso and Mobil. These companies sell products both globally and in the United States. The company’s principal business is energy research, production and exploration of crude oil and natural gas as well as manufacturing of petroleum products and transportation of crude oil, natural gas and petroleum products. . In January 2012, Apache Corporation (APA, Financial) acquired its Mobil North Sea Limited assets, including the Beryl field and related properties. In April 2013, BNK Petroleum Inc. sold Tishomingo Field, Oklahoma assets other than the Caney and upper Sycamore formations to XTO Energy Inc. (XTO, Financial), a subsidiary of Exxon Mobil Corporation.
Parting words
In the end, the company has its future securely placed with money flowing into research and the appropriate areas of growth. Exxon Mobil is far from pushing the panic button with valuation of the company looking to rise upwards thanks to global positive growth despite slow cash inflow. Oil production will be the company’s forte and steady demand will ensure the company continues to capture market share.
