Exxon Mobil is an oil and gas company that was founded in 1999; a merger of Exxon and Mobil. It is a Descendant of John D Rockefeller’s Standard Oil Company (Exxon Mobil). Exxon is a US based company with its head quarters located in Irving Texas, even though it is considered an international corporation. Exxon Mobil is considered the world’s largest publicly traded international oil and gas company, and has even been ranked as the number one traded company in the world. Currently Exxon is traded on the New York Stock Exchange, is a Dow Jones Industrial Average Component as well as a S&P 500 Component (Exxon Mobil). When it comes to oil, Exxon Mobil does it all. With 102,700 employees, Exxon has broken its operations into two main categories Upstream and Downstream (Yahoo Finance). Exxon does partake in other types of operations such as it operates coal mines and has its own IT, real estate, help center, as well as an engineering and chemical research and development department which fall under the umbrella of Exxon Mobil Corp (Exxon Mobil). Exxon’s two main divisions are incredibly important in keeping its industry advantage, where the Upstream sector is responsible for the exploration of new resources in an efficient and economical manner. The Upstream sector also extracts resources and then deals with the wholesale and distribution of the minerals. The Down Stream operations include refining the mineral and managing retail operations and marketing. Due to Exxon’s vast capabilities and duties within its industry, Exxon finds itself competing with many other companies that are fighting for a share of the market revenues. Just a few of its large competitors are Chevron, BP, Cabot Oil and Gas, Marathon Oil Corp (Yahoo Finance). There are also a number of overseas oil competitors such as Saudi Arabian Oil Co, National Iranian Oil Co, and Royal Dutch/Shell (Market Intelligence Center). This vast market width creates domestic and international difficulties such as growth with unpredictable tax laws and complex international trade embargos. Exxon Mobil continuously tries to keep a competitive advantage over its competitors as the company researches new, efficient, and cost effective strategies to extract and refine natural resources (ExxonMobil.com). Exxon also has significant capital tied up in its technology sector as it researches new ways to advance and perfect technology as well as further the knowledge on producing clean energy. By leading the industry in new research and cheaper methods in exploration and extraction resources, Exxon is able to continue its growth internationally as well as increase its presence across the ocean floors through oil platforms. All in all the oil industry was hit hard during the recession. The demand for oil plummeted and the revenues of these major oil companies hit record lows. During 2007, Exxon earned over 40 million dollars in income which it match and exceeded its revenue 5 million in 2008. When the recession hit Exxon recorded net income of only 4.7 million in the third quarter of 2009, but grew steadily to 7.5 million during their last quarter of the year (Yahoo Finance). Because of the sharp downturn Exxon has been forced to cut back on growth even though they have been showing positive cash flow streams. Just because Exxon hasn’t been performing to its past expectations doesn’t mean that it is a weak buy. All companies in the oil and gas industry are struggling to stimulate growth and earn profits that they once had in 2008. Fortunately there are signs that the economy is recovering. This means that demand for oil will go up, increasing the price per barrel. Once the economy starts picking up the price of Exxon will increase as well. The stocks for Exxon have been all over the graph. During Exxon’s peak, price per share nearly touched $95. Once the recession hit, the price per share plummeted to 57 dollars per share and now it is hovering around $60 a share (Yahoo Finance). Just like every other stock in the oil and gas industry, shares dropped in relation to the smaller revenue streams. Exxon has been distributing dividends at 42 cents per share this last year. The reason why Exxon might be a good stock to purchase is because there is a probable increase in demand for oil this year. Even though just this week, a surplus of oil was found in the US, meaning that demand shrank; in China, the demand for oil rose almost 8% since last year (Yahoo Finance). This means that the global recession is coming to an end, if not so already. Even though price per barrel dropped by a dollar (as it normally does nearing the end of Summer), the price of Exxon’s stock has virtually remained unaffected, meaning shareholders are holding their shares and waiting to see what the market does. This means that there is a likely possibility that during the 4th quarter this year the demand for oil will go up.
Historically the stock market underperforms in September and it usually is noticeable in the second half of September. Even though there has been growth this month, I wouldn’t advise in purchasing Exxon for a short term gain because there are too many uncertainties in the market. As history has shown, September has reported a dip in the market but the growth during September has offset that urge to sell. I would advise against investing in the oil and gas industry until there is clear evidence that the market has truly turned around. I especially wouldn’t invest in the oil and gas market if your goal is a short term gain, due to the unpredictability of the market.