Exxon Mobil Case

• XOM is one of the best-positioned stocks in the current oil environment due to its resilience and diversity, as a result of which it beat earnings estimates last quarter.
• XOM is benefiting from lower feedstock costs, while it has also reduced its capex substantially in a bid to lower the impact of weak oil pricing on its margins.
• XOM is focusing on growth areas such as LNG in the Asia-Pacific by increasing capacity as this will help it tap increased demand and weak supply in the market.
• XOM could also benefit from better oil pricing as supply is expected to come down due to a variety of reasons, while demand will increase due to low pricing.
Why Exxon Mobil Is a Buy
Exxon Mobil (XOM) shares have remained resilient this year on the stock

The better-than-expected performance from Exxon was driven by a higher profit from its refining business as feedstock costs declined. The following chart clearly shows the sequential improvement in Exxon’s bottom line performance in the recent quarter: Source: Exxon Mobil
As seen above, Exxon has laid stress on improving its margins by way of reducing costs at an impressive clip. In my opinion, this places the company in a good position to weather any weakness in the oil market going forward. Let’s take a look at the strategy being followed by Exxon in order to hold itself steady in a weak oil pricing environment.
Cost reductions across the board are a tailwind for Exxon
Exxon has aggressively reduced costs across the board. So far this year, Exxon has achieved a net reduction of $8 billion in capital and cash operating costs. Additionally, the company has also reduced its 2015 capex as compared to last year by $4.5 billion. Apart from this, it has also achieved a 10% reduction in unit costs in its upstream business on a year-over-year basis. As seen in the following chart, Exxon has recorded impressive cost savings in different areas of its business, which is a good

is declining. The decline in the rig counts is having an effect. While U.S. weekly production estimates from the Energy Information Administration have been declining from about 9.6 million barrels per day in May and June to 9.1 million barrels per day last week, something else happened; U.S. Gulf of Mexico production increased by over 200,000 barrels per day, meaning the effect of the lower rig count on oil production may be more significant than one might think.”
The report further stated that “With violence continuing in the Middle East, while the Venezuelan and Nigerian governments deplete their foreign reserves, there is upside to the oil market.” On the other hand, demand for oil is expected to grow at a robust pace next year as buyers such as China take advantage of weak pricing to increase their reserves. Hence, the probability that Exxon will benefit from a gradual uptick in oil prices is also present.
Conclusion
Exxon Mobil is being cautious and opportunistic at the same time. On one hand, the company is reducing costs across the board, while on the other it is also focusing on areas that could deliver growth. This will help Exxon overcome the short-term weakness in the oil market, and set it up for growth in the long run as the prospects improve on the back of strong demand and falling supply. So, according to me, it makes sense to continue holding shares of Exxon Mobil from a long-term