Overview
The chart below shows the stock performance of Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and BP plc (ADR) (NYSE:BP) over the last four years.
In April 2009, all four companies traded at roughly the same price. Right as BP’s stock began taking off and distancing itself from the others, the Deep Water Horizons oil spill occurred The huge dip in the chart at the beginning of 2010 is the result of that disaster.
BP collapsed after the oil spill and has just barely been able to climb ahead of where it was in April 2009. Today, there is an almost $80 difference in share price between BP plc (ADR) (NYSE:BP) and Chevron Corporation (NYSE:CVX).
The spill’s impact
BP has already spent $24 billion due to the oil spill. The company is currently facing federal prosecutors who are seeking to show that the government, individuals, and business are owed billions of dollars more in civil damages under the Clean Water Act. The amount may reach as high as $18 billion, bringing BP’s total loss from this spill to $42 billion.
The fact that BP might soon owe $18 billion makes it a poor investment. BP has plenty of available cash so this won’t hurt in the short term, but it will hurt the company over the long term and will hamper growth and exploration. It will be much more difficult for BP to purchase and develop new wells like the one it successfully tested off the coast of Brazil a month ago.
BP saw a decline in its profit over last year. It earned $500 million less in the first quarter of 2013 compared to 2012.
Earnings
Chevron had a first-quarter earnings loss of 4.5%. Some of that was caused by Chevron’s refinery operations, which saw profits decline 13% as two of its refineries were undergoing maintenance for much of the year. This decline will likely be reversed in 2013 as the refineries become operational again.
ConocoPhillips’ first-quarter earnings fell 27%, and the company reported a profit of only $2.1 billion, far less than Exxon Mobil Corporation (NYSE:XOM)’s $9.5 billion. That being said, ConocoPhillips (NYSE:COP) sold $950 million in assets last year. If we take that into account, the company does have profit growth year-over-year. I believe ConocoPhillips has the potential to see its stock rise over the next year or so as investors witness a continuation of its rising profits.
While Exxon Mobil Corporation (NYSE:XOM) may have only returned 33% over the last four years, it has vast growth potential. ExxonMobil distinguishes itself from the other three companies as the only one to grow its profit year-over-year. ExxonMobil’s earnings improved slightly. One of the reasons for the disparity between its earnings and say, Chevron’s, was ExxonMobil’s refinery business, which increased its profit margins. Such growth is a reflection of the underlying strength of the company.
Revenue
ExxonMobil’s revenue declined in the first quarter by 12% and production volume fell 3.5% for the seventh consecutive quarter. This is undoubtedly part of the reason ISI Group cut ExxonMobil from a buy to a neutral position. However, I believe that now is actually the best time to buy Exxon Mobil Corporation (NYSE:XOM), and one reason is because of all of its growth potential.
Over the next four years, it will begin pumping oil and gas from about 24 new facilities around the world. One of the first such projects to come online was the Kearl Oil Sands in Canada, which was significantly delayed but finally began production in March.
One of ExxonMobil’s other large projects is the liquefied natural gas project in Papau New Guinea. This site will become operational in 2014.
ExxonMobil also agreed to a deal with Russian oil company Rosneft to build an LNG facility in the country by 2018. Additionally, Rosneft recently announced that it is working with the Iraqi administration on rights to drill within Iraq. Rosneft will need a partner for this and is considering utilizing ExxonMobil.
These are just a few of the facilities that ExxonMobil will begin harvesting oil and gas from over the next couple years. They are an indication that ExxonMobil’s falling production will come to an end in the very near future and that the company will be able to have steady production growth for the next few years.
As a final bonus, Exxon Mobil Corporation (NYSE:XOM) also raised its second-quarter dividend to $0.63 per share from $0.57 per share.
Conclusion
ExxonMobil has seen decent share price growth over the past few years, though it has been outstripped by Chevron and ConocoPhillips. Look for that to change moving forward. ExxonMobil is in a good growth position as evidenced by its better earnings in the most recent quarter and its production potential from its new operations.
The article ExxonMobil Is a Must Buy originally appeared on Fool.com and is written by Sean Sullivan.
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