Source: PaxForex Premium Analytics Portal, Fundamental Insight
Energy sector stocks, including ExxonMobil, have experienced significant upward momentum in the past couple of months, driven by escalating geopolitical tensions in the Middle East and subsequent increases in oil prices. However, investors considering buying ExxonMobil at this juncture should assess several key factors.
ExxonMobil stands as one of the globe's leading oil and gas enterprises, renowned for its robust capital management practices and impressive track record of dividend increases spanning 41 years. Its resilience amidst the volatile energy sector is attributed to its diversified business model spanning the entire energy value chain.
In essence, ExxonMobil operates across the upstream, midstream, and downstream segments of the energy sector. Upstream activities encompass exploration, drilling, and extraction, while midstream operations involve processing, storage, and transportation. Downstream activities entail refining crude oil into various energy products.
The integrated nature of ExxonMobil's operations allows it to navigate fluctuations in oil and gas prices more effectively compared to companies focused solely on one segment. For instance, while upstream activities benefit from surges in oil and gas prices, downstream operations often provide stability, capitalizing on lower input costs during periods of price decline.
This integrated approach not only bolsters ExxonMobil's resilience but also positions it as a reliable dividend stock. Many major players in the oil and gas industry adopt similar integrated models, recognizing the value of diversification in mitigating market volatility.
In conclusion, while ExxonMobil's recent performance may be enticing, prospective investors should conduct thorough assessments of its current position within the broader energy landscape and evaluate its long-term growth prospects before making investment decisions.
ExxonMobil has seen significant advantages from the surge in oil prices in recent years, enabling it to fortify its financial position by reducing debt and rewarding shareholders through dividends and buybacks.
Over the past two years alone, ExxonMobil has amassed an impressive $98 billion in free cash flow. A substantial portion of this has been allocated to debt reduction, with the company slashing nearly half of its pandemic-induced long-term debt, leaving around $38 billion outstanding today.
Furthermore, ExxonMobil's commitment to shareholder returns remains steadfast, evidenced by its 41st consecutive annual dividend increase, boasting a 4.4% raise and yielding investors over 3% annually. The company has also significantly augmented its share buybacks, with plans to ramp up repurchases to $20 billion following its merger with Pioneer Natural Resources.
Nevertheless, investing in the oil and gas sector carries inherent risks. Despite ExxonMobil's integrated model, commodity price fluctuations can introduce volatility, as demonstrated by the sector's struggle amidst the pandemic-induced economic downturn.
However, the current landscape appears favorable for oil and gas majors. Concerns over declining crude reserves, coupled with strategic moves like the release of the Strategic Petroleum Reserve (SPR), have underscored the importance of maintaining oil supplies. Additionally, OPEC+'s production cuts have tightened global oil markets, supporting prices.
With an improving financial outlook, robust capital returns, and favorable market conditions, ExxonMobil presents itself as a compelling long-term investment opportunity.
As long as the price is above 115.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 119.50
- Take Profit 1: 123.00
- Take Profit 2: 128.00
Alternative scenario:
If the level of 115.00 is broken-down , follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 115.00
- Take Profit 1: 111.00
- Take Profit 2: 106.00
