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Exxon Spill Over Continues

Zacks Equity Research

Oil splurge continues in the Midwest by the world’s largest oil company by market value, Exxon Mobil Corporation (XOM). The spill comes in the wake of an apparent breach in the Pegasus pipeline carrying crude oil to the U.S. Gulf Coast.

On Mar 29, 2013, Exxon Mobil closed its Pegasus pipeline system after a leak spilled crude near the town of Mayflower, Ark. The pipeline used to transfer more than 90,000 barrels per day (bpd) of crude from Patoka, Ili. to Nederland, Tex.

However, clean-up operations are ongoing at the site. The company claims to have deployed 2,000 feet of boom and mobilized 15 vacuum trucks at the site, with the help of its clean-up crew.  Approximately 4,500 barrels of oil and water have been recovered. The company also said it observed a few thousand barrels of oil in the area, but was staging a response for more than 10,000 barrels to be conservative.

The spate of problems from pipeline had always haunted Exxon Mobil over the past. Last week, the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration initiated an administrative enforcement action against the company. The administrative body proposed a fine of $1.7 million to Exxon Mobil Pipeline Company as a result of the operator's Jul 2011 crude oil pipeline failure in the Yellowstone River near Laurel, Mont.

Now, in light of rising U.S. stockpiles, the Exxon Mobil pipeline debacle – which threatens to lower the crude oil transported from the U.S. Midwest – could depress oil prices in the country. As it is, for the week ending Mar 22, 2013, U.S. crude stock increased 0.9% and was hovering more than 12% above the five-year average.

Exxon Mobil is the world’s largest publicly traded oil company, engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Approximately 83% of Exxon Mobil’s earnings come from its operations outside the U.S.

Exxon Mobil holds a Zacks Rank #3 (Hold). However, the Zacks Ranked #1 stocks of Stone Energy Corporation (SGY), Range Resources Corporation (RRC) and EPL Oil & Gas, Inc. (EPL) are expected to outperform the market over the next few months.

Read the Full Research Report on RRC

Read the Full Research Report on SGY

Read the Full Research Report on XOM

Read the Full Research Report on EPL

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