Exxon Mobil Will Do Well in the Long RunXOM) has faced weakness in the current oil scenario, the company is making certain positive moves. For example, in the first half of fiscal 2015, Exxon Mobil generated about $17.9 billion through cash from operation and asset sales. This helped it bring its free cash flow into positive territory despite prevailing tough conditions in the markets.
It had free cash flow of $3.9 billion by the end of second quarter 2015. Strong growth across its downstream and chemicals businesses coupled with rich project execution helped the company to achieve this strong cash from operation.
New project updates
To me the most catching point was its start up of new development projects, favorable volume and mix effects that increased its earnings by $330 million at the current market price for oil and gas.
These should together act as tailwinds for Exxon Mobil going forward. Its new projects particularly in Guyana, Romania, Canda, Nigeria and Indonesia displays good investment platform for Exxon Mobil.
Exxon Mobil continues to achieve high-quality resources to its project pipeline. In fact, its recent findings of Guyana look pretty attractive. It made a significant oil discovery on the 6.6 million acres at Stabroek Block well. This is drilled about 120 miles offshore and encountered more than 295 feet of high quality oil bearing of sandstone reservoir. It is pleased by the early results at this asset and further assessing commercial viability of the resource as well as evaluating additional potential on the block.
Apart from this discovery, the company stands tall with its new development projects in Canada. Its Kearl expansion project has just started in June and is producing more than 100,000 barrels of bitumen per day. The average production at Kearl was 130,000 barrels per day during the second-quarter. The company expects Kearl production to reach more than 220,000 barrels of oil equivalent per day in the remaining quarters. Moreover, Exxon Mobil is learning a lot from this initial development of the project that will allow XOM to capture lower capital costs and operational efficiencies.
Exxon Mobil’s operating cash flows as well as free cash flow are seeing an uptrend that makes the stock pretty attractive. Moreover, its new development projects, favorable volume and mix effects should drive its growth in the long run. Hence, an investment in Exxon Mobil can lead to long-term returns.
Published on Oct 25, 2015By Yaggyaseni Mittra