U.S. energy behemoth Exxon Mobil Corp. (XOM) announced plans to install a new processing unit at the Slagen refinery in Norway, for production of high quality vacuum gas oil feedstock. This would be used to create finished products such as diesel. The new unit will improve the facility’s overall crude distillation process by replacing production of heavy fuel oil with lighter, higher-value gas oil.
This project, coupled with the recently announced major upgrade at the company’s Antwerp facility, will further strengthen ExxonMobil’s integrated downstream portfolio in Europe to better compete in the challenging refining industry.
ExxonMobil is investing for the future in its Slagen unit despite low refinery margins and industry-wide losses in Europe. This project demonstrates ExxonMobil’s long-term view, with strategic investments in advantaged refineries to more successfully face the challenging industry environment. The company is also evaluating investments in other advantaged assets in its global refining network.
The world’s largest publicly traded oil company, ExxonMobil is engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Approximately four-fifth of Exxon Mobil’s earnings come from its operations outside the U.S.
Exxon Mobil is one of the world’s best-run integrated oil companies given its track record of superior returns on capital employed. The energy giant has long been a core holding for investors seeking a defensive name with continued dividend growth. Exxon Mobil is fairly active in its investment program. The company plans to spend about $185 billion over the next five years, up 29% over the last five-year period.
The strength of Exxon Mobil lies in its balanced operations, strong financial flexibility, continued efficiency and cost control. The company’s efforts to build an unconventional resource portfolio both in North America and overseas are aimed at increasing production through a wider exposure to large energy resources with a long reserve life and low field declines. However, we are skeptical about the company’s near-term performance due to its muddled refining fortunes.
Exxon Mobil currently holds a Zacks Rank #3 (Hold). However, in the near term one can consider better-ranked stocks like Pioneer Energy Services Corp. (PES), TransAtlantic Petroleum Ltd. (TAT) and Sunoco Logistics Partners L.P (SXL). All these stocks carry a Zacks Rank #1 (Strong Buy).