Is It the Right Time to Buy Exxon Mobil Corporation (XOM)?

Moving on to the cash flows – ExxonMobil has hugely impressive cash flow generation ability. At the end of 2012, the company’s cash flow from operations was $56.1 billion, representing a slight increase from the year ago levels of $55.3 billion.

In addition, Exxon Mobil Corporation (NYSE:XOM) paid cash dividends of $10.4 billion and generated $21.9 billion in free cash flow last year. Free cash flow has decreased, but the free-cash-flow-to- dividend coverage is still very strong. The payout ratio based on free cash flow still hovers below 50%, which gives the company enough room to grow dividends.

Competitive landscape

Some of the other major players in the sector are Royal Dutch Shell plc (ADR) (NYSE:RDSA) and BP plc (ADR) (NYSE:BP). Most of these companies are now changing their strategies and moving toward higher-growth segments of the market.

In a growth plan representing the 2012 through 2015 period, Shell indicated it expects to generate between $175 billion and $200 billion in total cash flow from operations. Further, the company is trying to expand the pipeline of its products.

Like many of its peers, Royal Dutch Shell plc (ADR) (NYSE:RDSA) is trying to exit non-core low-growth assets and invest in high-growth assets. Shell is one of the first companies to receive a license to export LNG from North America.

British Petroleum is also shedding its non-core and low-growth assets and is investing in high-growth locations. The company recently sold its stake in the Russian company TNK.BP, and invested some of the cash in Rosneft, Russia’s state-owned oil company. In addition, the company decided to return some of the cash ($10 billion) to its shareholders.

Conclusion

Energy demand will increase substantially in the near-future, and ExxonMobil will be one of the primary beneficiaries of rising demand. Future growth prospects make Exxon Mobil Corporation (NYSE:XOM) a buy at the moment. ExxonMobil is one of the best managers of capital in the industry. It has spent over $100 billion in capital expenditures over the past four years to build an impressive portfolio of assets. As a result, of efficient management and capital allocation policy, the company has been able to set itself apart from its peers.