ExxonMobil (NYSE:XOM) shares are down 33% from their 2014 highs. When you look at the broad energy industry, it's pretty apparent why this international oil giant's shares are struggling.

But the company's doing something now that management believes will set it up well for the future. Here are a few things you need to understand about Exxon today, including why, despite the horrible stock price performance, it could be a good buy.

It's ugly

The price of oil spiked above $100 a barrel in 2014 before falling into a deep bear market that took prices into the $30 per-barrel range. Oil has since recovered into the $50 to $80 space, but it hasn't been a smooth ride.

In fact, oil has gone through multiple bear markets over the past couple of years. Recently, it's been trending toward the lower end of this price range. Investors who own drillers like Exxon aren't exactly pleased.

A man sitting on a step holding his head with stock tickers behind him and a falling stock price chart

Image source: Getty Images.

That said, it isn't just oil that's in the doldrums. Natural gas prices are historically low, as well. Although this fuel is expected to see notable demand growth in the years ahead as it displaces coal in electricity production, U.S. onshore drilling has left a glut of the fuel in the market.

And if that wasn't enough, Exxon's diversified business isn't only getting hit on the upstream (drilling) side, it's also seeing pressure on the downstream side. Margins in its refining and chemicals businesses are near 10-year lows. It's rough out there for Exxon today.

But here's the thing: Exxon can't control any of these issues. It sells commodity products and has to just suffer through downturns. However, it's been through periods like this before and knows how to do that.

The hidden positives 

For starters, Exxon is a very conservatively run energy company. Although its diversified business hasn't been a help today, it's one piece of the puzzle. The other big piece is the company's rock-solid balance sheet.

Exxon's financial debt-to-equity ratio is roughly 0.15 times, which is among the lowest of its integrated energy peers. During the worst of the deep oil downturn that started in mid-2014, Exxon leaned on its balance sheet so it could continue to support its growing dividend (its 37-year streak of annual increases bests all of its peers) and capital-investment program.

XOM Financial Debt to Equity (Quarterly) Chart

XOM Financial Debt to Equity (Quarterly) data by YCharts.

Although it's been trimming debt over the last few years, Exxon hasn't given up on investing for the future. In fact, it plans to spend as much as $35 billion a year through 2025 on new oil and natural gas drilling and augmenting its downstream business with new processing plants.

It's already making notable progress in at least one area -- online U.S. drilling. This business is expected to double its production by 2024 on top of already strong growth. There's more production growth that could come from this effort after 2024, as well, with Exxon highlighting the ability to turn a decent profit, even if oil prices fall to $35 per barrel. It's this business that has started to shift Exxon's production higher again after a few years of declines.

This isn't the only investment activity going on. Exxon is also working on offshore oil projects and natural gas investments that have witnessed solid early exploration results. This led to a nearly 15% increase in the oil giant's proved and probable reserves in 2018. Further improvements are likely based on the news flow so far in 2019. The key is that this is oil and natural gas that Exxon believes it can pull out of the ground at some point in the future. The growth in proved and probable reserves hints that these investments will, as expected, lead to good production results as they come online through 2025. 

While Exxon can't control the prices of oil and natural gas or the margins it sees in chemicals and refining, it can control its production profile. It's working hard to make sure that, despite the current downturn, it's ready when the next upturn comes around. That notably includes building new refining and chemical businesses. 

There's another key trend taking shape today. Exxon is selling assets. One big reason for this is to put the cash to work on its capital-spending plans. That helps to keep the balance sheet strong since the company doesn't need to rely as heavily on debt to fund its plans.

But there's another issue here -- Exxon is actively upgrading its portfolio. It specifically wants to own the best assets, again controlling things it can control to position itself for a better future.

On the oil and gas side, it's looking for plentiful assets that can be extracted at low cost. On the downstream side, it's trying to move up the value chain so it can earn higher margins. It believes it's selling lesser assets while investing in ones with better long-term profit potential.

These are the types of things you want to see a company doing, even though the weak pricing environment has largely overshadowed such moves.

One more thing to like

Exxon, which is conservatively financed and managed, is starting to see positive early results from its big capital-spending plans, which are things it can control. Investors, however, are focused on the price of oil and natural gas, which Exxon can do nothing about. With a rock-solid balance sheet, Exxon is likely to make it through this period just fine. And eventually, Wall Street will start to recognize the value of the investments it's been making.

This opens up a near-term opportunity for long-term investors interested in collecting fat dividends. Exxon's 5% yield is near the highest levels it has seen in over two decades. Its price-to-tangible-book-value ratio is lower than it has been in more than three decades. Put simply, Exxon looks cheap today.

Don't expect the energy market to suddenly turn higher or for Exxon's financial results to improve dramatically in a quarter or two. But management is doing the right things to build a brighter future, and you can get paid very well to stick around while it executes its plans.