What Will ExxonMobil Need to Surge in 2013?

Now that 2012's nearly in the rearview mirror, investors are beginning to sift through the market for the best stocks of the upcoming year. The future is plagued with uncertainty, but that has always been the case, and it's never stopped us from seeking out long-term values. One way to find those values is to look for companies with a long history of success. The Dow Jones Industrial Average (^DJI -0.11%) contains many such companies, but some are better investments than others.

Today we'll be taking a look at ExxonMobil (XOM 0.02%), a Dow component since 1928 (when it was first added as post-trust-busted Standard Oil of New Jersey), to see whether its preparations for 2013 -- and analyst attitudes -- indicate a stock with growth potential, or one to avoid.

First-half recap
This hasn't been ExxonMobil's best year. Its free cash flow has declined significantly, and although net income has grown, the bare improvement in other metrics over the past four quarters tracks the rate of inflation:

XOM Revenue TTM data by YCharts

ExxonMobil's back under a $400 billion market cap for the first time since the summer as investors grow nervous over what appears to be stalling momentum. Analysts have largely shrugged their shoulders at ExxonMobil, as only five of 23 tracked analysts rate it a "strong buy" right now:

Sources: Yahoo! Finance and Morningstar.

What the numbers don't tell you
Whatever happens in 2013, there's one thing that virtually no one can confidently predict: energy prices. Whatever else ExxonMobil manages to do to improve its efficiency and increase its rate of extraction will be, at best, a secondary concern on the company's bottom line. If oil drops, so will ExxonMobil -- and so will the rest of the oil industry. You're probably sick of hearing this by now, but the threat of economic uncertainty can and will depress oil prices if the economy starts to decline. Even a certainly expanding economy in America can't hold up oil prices if China and Europe tighten their belts.

However, should prices hold up, ExxonMobil will have plenty of resources to fund some big expansions. Some of these opportunities are downright massive. A proposed Alaskan LNG pipeline partnership with ConocoPhillips (COP -0.43%) and BP (BP 0.13%) could cost $65 billion, dwarfing both its earlier estimates and the cost of the original Trans-Alaska oil pipeline that transformed the state into a major American energy producer.

According to National Oilwell Varco (NOV -0.16%), there may be a rising tide of deepwater drilling interest that's reflected in the changing attitudes of major energy execs. ExxonMobil agrees, as its energy outlook shows deepwater drilling making the greatest production gains of any source. Deepwater rigs are coming into service at greater rates, offering ExxonMobil and its peers more opportunities for offshore exploration than ever before.

However, even if oil prices do hold up and these new opportunities pan out, the possibility of tax reform (hold your chuckles, please) could shred any number of lucrative loopholes ExxonMobil and other supermajors use to offset the high costs of energy exploration. I don't see real tax reform happening with the incoming Congress, but maybe President Obama will become a master hypnotist next year. Stranger things have happened. You are feeling very tax-y...

Uncertainty sucks. Unfortunately, ExxonMobil investors will have to live with it for at least part of 2013. Take comfort in the fact that this is a company that's survived oil spill disasters, multiple recessions, OPEC price shocks, and all sorts of negative publicity without losing its footing.