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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

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.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

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. The show is also heard weekly on dozens of 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. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers