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ExxonMobil: A Great Buying Opportunity

- By Harsh Jain

ExxonMobil Corp. (XOM) showed healthy performance in 2016 as the stock was up approximately 16%. The stock is off to a disappointing start heading into 2017 however. It is down nearly 10% year to date.

Oil prices play a very important role for the company. The downturn in oil prices began in the middle of 2015, but showed upward momentum throughout the past year. The healthy recovery in oil prices accounts for the company's decent performance in 2016.


ExxonMobil reported feeble fourth-quarter results on Jan. 31. For the quarter, the company shared EPS of 41 cents, missing the analyst estimates by 29 cents. On the other hand, the company's revenue came in at $61.02 billion, again missing the consensus by a wide margin of $1.26 billion.

Despite the miss, that figure still signifies a surge of 2% year over year compared to a drop of 31.5% in the fourth quarter of fiscal 2015.

ExxonMobil's overall production came in at 4.1 million barrels of oil, a trivial drop from 4.2 million barrels of oil a year ago. Moreover, the company also announced it plans to expand operations at one of its most significant petrochemical plants in the U.S. Gulf Coast. It also plans to expand the capacity by 65% at its polyethylene plant.

Most importantly, the oil giant endures to discover new oil and gas deposits. In 2016, the company made several significant discoveries, including offshore wells in Guyana and Nigeria and as onshore natural gas discovery in Papua New Guinea. The company confirmed abundant resources can be extracted from these new discoveries.

In addition, the company recently acquired 250,000 acres in the Permian Basin of Texas for $5.6 billion. It is estimated the land contains approximately 3.5 billion barrels of recoverable oil equivalent (ROE). As a result, the company has become one of the prevalent acreage holders in the area.

Apart from this, ExxonMobil has an astonishing track record of rewarding shareholders by paying dividends. On the back of increasing oil prices, the company was able to prolong its 34-year streak of increasing dividend payments, boosting it by 3% to 75 cents a share in 2016.

Summing up

Although the oil giant has faced several problems over the past few years, it still looks like a great long-term buy. Among all the players in the oil and gas industry, ExxonMobil has the sturdiest balance sheet. Furthermore, the company's cash generation has grown substantially compared to the previous quarter, indicating a brighter 2017.

The stock currently trades at $81.76 a share, down 10% year to date. As a result, it presents a good buying opportunity for investors looking to initiate a position in the stock.

Disclosure: No position in the stocks mentioned in this article.

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This article first appeared on GuruFocus.