ExxonMobil is Dragging Down the Dow Today

A prediction of flat production in 2014 has shares of ExxonMobil falling today.

Mar 5, 2014 at 3:30PM

Stock markets are mixed today on further evidence that the job market has been heavily affected by weather this winter. Payroll processor ADP said that 139,000 nonfarm private-sector jobs were added in February, which was up from 127,000 in January, although that number was revised down from an original estimate of 175,000. In short, the U.S. economy is adding jobs at a particularly measured rate, and one reason for the slow uptick could be nasty weather across most of the country this year.  

The Dow Jones Industrial Average (DJINDICES:^DJI) was off a slight 0.24% in late trading; index members are split between risers and fallers. If it weren't for a 2.8% drop in shares of ExxonMobil (NYSE:XOM) the index would be trading about flat for the day.

Holes forming in big oil
ExxonMobil's sharp sell-off today comes after the company said overall production would be flat this year at about 4 million barrels of oil equivalent per day. But liquids production is expected to grow between 2% and 4% from 2015-2017 as new projects come online.  

Xom Station Image

U.S. consumers are spending less time at ExxonMobil stations like this one.

The slow production growth is part of a focus on higher-margin energy plays and a cutback on low-margin segments such as lU.S. natural gas. Capital spending will drop 6% to $39.8 billion this year from $42.5 billion a year ago and is expected to average less than $37 billion from 2015 to 2017.  

The other thing weighing on investors today is the future of ExxonMobil's holdings in Russia. The company has drilling rights to 11.4 million acres there and expects Russia's Arctic shale to be a big growth opportunity. If the U.S. sanctions Russia following the Putin government's incursion into Ukraine's Crimea region, those assets could be in jeopardy, further eroding potential growth.

The core problem for ExxonMobil
Data points such as projected production and return on investment have caught investors' eyes today, but the big long-term problem is that oil and natural gas are becoming harder and more expensive to produce. You can see that in the decision to forgo growth opportunities to focus on plays where margins are higher.

This is the new world in which Big Oil plays, where alternatives to oil and gas exist and consumers aren't willing to pay higher prices every year. In fact, consumption is down over the past decade in the developing world, which isn't good for ExxonMobil's future revenue growth.

One of the bigger winners in energy
Where the big money is being made right now is in providing service to explorers like ExxonMobil. Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers