Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Big Oil Drags Down the Dow

Without much in the way of market-moving news, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has had an up and down day and was trading 0.43% lower at 3:30 p.m. EDT. The fear over escalation of the Russia-Ukraine conflict has died down, earnings season is over, and economic data has been decent but not enough for either bears or bulls to take control of the market recently.

Investors should keep in mind that earnings will ultimately drive stock performance, and that profits are rising steadily and most companies are beating estimates. But not everyone is doing well; one major Dow segment worth worrying about is energy, which showed further signs of long-term headwinds today.

U.S. consumers are filling up less often at Chevron stations like this one.

Chevron (NYSE: CVX  ) was down 1.1% and ExxonMobil (NYSE: XOM  ) fell another 1.6% in today's trading. The drops came after Chevron followed ExxonMobil in cutting its production outlook. Chevron said production by 2017 would be 3.1 million barrels of oil equivalent per day, down from a previous estimate of 3.3 million. That's still up from 2.6 million barrels of oil equivalent per day this year but shows further challenges for Big Oil in coming years. 

ExxonMobil recently said its production will be flat this year and that capital spending will drop from $42.5 billion in 2013 to $37 billion between 2015 and 2017. It's running into the same challenges as Chevron, facing higher costs of exploration and lower returns on multibillion-dollar drilling projects.

This isn't a new trend for Big Oil; you can see the challenge in where and how they're drilling for new oil and gas. Fracking wells that were once uneconomical is now a major source of U.S. energy production; wells drilled in more than a mile of water accounted for half of the new discoveries last year. These are expensive places to drill and a single mistake in where you invest billions of dollars can be costly, so they're focusing fewer dollars on high return, high probability projects.

That's good for returns in the near term and should keep profits high, but the energy industry is all about growing production long term and the level of investment should be concerning for investors. Developed countries are using less and less oil, and as alternative energy becomes more economical these companies could be in for a long, slow decline.

Find out what companies are the future of industry
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2872872, ~/Articles/ArticleHandler.aspx, 8/31/2015 8:17:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

Today's Market

updated Moments ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 4:57 PM
^DJI $16528.03 Down -114.98 -0.69%
CVX $80.99 Up +0.56 +0.70%
Chevron CAPS Rating: ****
XOM $75.24 Up +0.17 +0.23%
ExxonMobil Corp CAPS Rating: ****