ExxonMobil Earnings, Production Gain Momentum; Time to buy this oil giant?

Among American oil and gas majors, ExxonMobil (NYSE: XOM) has been considered a laggard for years. Shares generally performed less well in both short and long-term market and sector meetings to ensure that the company had no direction, even if output continued to decline.

XOM weekly magazine 2016-2019

That may be about to change. The company's impressive earnings figures last Friday, which are consistent with EPS, also showed that oil production rose in the past two quarters and grew slightly

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This could mean that ExxonMobil shares are finally ready to fully participate in future rallies as the oil markets continue their recovery in 2019, after a tumultuous 2018. Since their December low of $ 64, 65, shares – closing yesterday at $ 75.26 – have recovered at a pace that is not far behind its competitors.

During that period ExxonMobil's share increased by more than 16%, while Chevron (NYSE 🙂 (NYSE: CVX), its close rival, won about 18%. Even more exciting for investors, Exxon Mobil (NYSE 🙂 finally shows some results in solving production problems.

In the final months of 2018, the company's oil and gas production rose above 4 million barrels per day for the first time since early 2017. In the fourth quarter, the company achieved a profit of $ 1.41 per share, which beat analysts & # 39; consensus forecast of $ 1.08.

Cash flow from operating activities for the year, a major indicator for investors, rose to $ 36 billion. That was enough to cover the rising capital expenditures of nearly $ 21 billion, as well as the 4.32% profit dividend of the company, which represents an annual payout of nearly $ 14 billion.

Severe expenditure on fuel growth

Despite these positive signals, investors need to understand one thing before buying shares of oil supermajors, because this sector is currently in a phase of low growth. As such, those companies that can generate more income from operational preparedness, technological progress and cost control can become the ones rewarded by investors

In our opinion ExxonMobil meets these parameters. The company has adopted a long-term approach to improve its growth prospects, different from other large producers who try to stabilize their shares by cutting back on the main expenses and investing more money in investor pockets through the purchase of own shares and payments

Chevron, for example, announced early this month that it increased its quarterly dividend to $ 1.19 per share from $ 1.12 in the previous quarter. The board also approved a $ 25 billion share repurchase program.

Rewarding investors with more cash can boost share prices in the short term, but that strategy threatens to jeopardize future growth. CEO Darren Woods from Exxon is looking at the longer term. He believes the oil industry needs a huge injection of new investments to meet the new challenges, making it the wrong time to give money back to investors.

Woods has started a $ 230 billion plan to revitalize the oil giant, focused on drilling opportunities around the world. These include shale pits in Western Texas, facilities for the export of natural gas in Papua New Guinea, a series of giant discoveries in the South American nation of Guyana and developments in Mozambique and Brazil.

Bottom Line

The growth projects of Exxon are extremely attractive. They undoubtedly set up the company for future expansion. However, it is also important to remember that these investments will not pay off in the short term.

If your investment horizon is longer-term and you want to add an integrated oil giant with a diversified portfolio of assets to your business, you should consider ExxonMobil. Their annual dividend is attractive, especially now that Exxon has regained its earnings momentum, which should promote the future growth of the share.

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