Oil Prices Surge, Oil Giants Face Challenges
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy XOM?
Source: Fool
- Surge in Oil Prices: Brent crude oil skyrocketed by 94% in Q1, marking the largest quarterly gain since 1990, positioning oil companies for substantial profits, although not all firms fully benefited from this surge.
- Production Disruptions: Operations at ExxonMobil and Shell faced interruptions due to the Middle East conflict, with Exxon expected to see a 6% decline in global oil and gas production and Shell a 7% drop, directly impacting their financial performance.
- Long-term Loss Projections: ExxonMobil anticipates a $4.9 billion loss due to derivative accounting rules, while Shell expects a $15 billion hit to working capital, indicating significant financial pressure on both companies moving forward.
- Offsetting Effects of High Prices: Despite production declines and losses, ExxonMobil forecasts a $2.3 billion boost in Q1 earnings from rising oil prices, with Shell's earnings now expected to exceed initial forecasts by 10%, suggesting that elevated oil prices will help mitigate some negative impacts.
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Analyst Views on XOM
Wall Street analysts forecast XOM stock price to fall
19 Analyst Rating
12 Buy
7 Hold
0 Sell
Moderate Buy
Current: 163.910
Low
114.00
Averages
132.17
High
158.00
Current: 163.910
Low
114.00
Averages
132.17
High
158.00
About XOM
Exxon Mobil Corporation is an energy provider and chemical manufacturer. The Company’s principal business involves exploration for, and production of, crude oil and natural gas; the manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and a wide variety of specialty products; and pursuit of lower-emission and other new business opportunities, including carbon capture and storage, hydrogen, lower-emission fuels, Proxxima systems, carbon materials, and lithium. Its Upstream segment explores for and produces crude oil and natural gas. The Energy Products, Chemical Products, and Specialty Products segments manufacture and sell petroleum products and petrochemicals. Energy Products segment includes fuels, aromatics, and catalysts and licensing. Chemical Products segment consists of olefins, polyolefins, and intermediates. Specialty Products segment includes finished lubricants, basestocks and waxes, synthetics, and elastomers and resins.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Oil Prices Surge, Oil Giants Face Challenges
- Surge in Oil Prices: Brent crude oil skyrocketed by 94% in Q1, marking the largest quarterly gain since 1990, positioning oil companies for substantial profits, although not all firms fully benefited from this surge.
- Production Disruptions: Operations at ExxonMobil and Shell faced interruptions due to the Middle East conflict, with Exxon expected to see a 6% decline in global oil and gas production and Shell a 7% drop, directly impacting their financial performance.
- Long-term Loss Projections: ExxonMobil anticipates a $4.9 billion loss due to derivative accounting rules, while Shell expects a $15 billion hit to working capital, indicating significant financial pressure on both companies moving forward.
- Offsetting Effects of High Prices: Despite production declines and losses, ExxonMobil forecasts a $2.3 billion boost in Q1 earnings from rising oil prices, with Shell's earnings now expected to exceed initial forecasts by 10%, suggesting that elevated oil prices will help mitigate some negative impacts.
See More
Oil Prices Surge Due to War with Iran
- Oil Price Surge: Brent crude skyrocketed 94% in Q1, marking the largest quarterly gain since 1990, positioning oil companies for substantial profits in the first quarter, although not all firms fully benefited from the price increase.
- Production Disruptions: Due to the war in the Middle East, both ExxonMobil and Shell faced operational disruptions, with global oil and gas production expected to decline by 6% and 7% respectively in Q1, negatively impacting their financial performance.
- Facility Damage: Iranian attacks damaged two liquefied natural gas (LNG) trains in Qatar, representing 17% of its production capacity, with repairs expected to take three to five years, exacerbating production challenges for ExxonMobil and Shell.
- Financial Impact: Despite production declines and losses, ExxonMobil anticipates a $2.3 billion boost in Q1 earnings from rising oil prices, while Shell's earnings are now expected to be 10% higher than initial forecasts, indicating that elevated oil prices are supporting profitability.
See More
Fragile Truce Leaves Strait of Hormuz Traffic Uncertain
- Slow Recovery: Despite a fragile ceasefire between the U.S. and Iran, traffic through the Strait of Hormuz remains stagnant, with only four transits recorded on Wednesday, indicating a lack of market confidence that could prolong global energy supply issues.
- Vessels Anchored: Over 400 oil tankers and dozens of LNG carriers are still anchored outside the Gulf, awaiting passage signals, which suggests that transit capacity has not returned to pre-war levels, impacting the stability of the global energy market.
- Risk Assessment Impact: Hapag-Lloyd states that returning to normal shipping schedules will take weeks or even months, as hundreds of thousands of containers remain at ports, highlighting the industry's uncertainty about future transport arrangements and potential cost increases.
- Market Dynamics Shift: Analysts note that while oil prices have dropped from $110 to $97, they are expected to remain above pre-war levels due to supply disruptions, reflecting the market's reliance on the Strait of Hormuz and its associated risks.
See More
Trump Reaffirms Tough Stance on Iran Amid Fragile Ceasefire
- Military Deployment Continues: Trump stated that U.S. military forces will remain deployed in and around Iran until Tehran fully complies with what he calls the 'real agreement', indicating a sustained U.S. military presence in the Middle East that may escalate regional tensions.
- Escalating Threats to Iran: Trump warned that any breach of the agreement would trigger a military response larger than ever seen before, which could raise market concerns about potential disruptions in energy supplies, thereby affecting oil price volatility.
- Strained NATO Relations: Trump criticized NATO for not supporting the U.S. when needed, highlighting a deterioration in relations with traditional allies that could impact future international cooperation and security policies.
- Iran Accuses U.S. of Violating Agreement: Iran's parliamentary speaker accused the U.S. of violating the two-week ceasefire agreement, citing actions such as Israeli attacks on Lebanon, which could further deteriorate U.S.-Iran relations and affect global market stability.
See More
Middle East Conflict Drives Oil Prices Up
- Oil Price Impact: The geopolitical conflict in the Middle East has driven oil prices higher, creating significant revenue and earnings benefits for integrated energy giants like ExxonMobil and Chevron, with expectations of elevated prices lasting for several quarters despite volatility.
- Financial Strategy Adjustments: Both companies may leverage their substantial cash flows to pay down debt and repurchase shares, thereby strengthening their financial positions, particularly as Chevron has slightly increased its leverage following the acquisition of Hess.
- Market Adaptability: While both firms have some exposure to the Middle East, they are increasing investments in the onshore U.S. oil sector to mitigate potential impacts from the conflict, ensuring business stability and resilience.
- Long-Term Development Perspective: ExxonMobil and Chevron's strategic outlook spans decades, allowing them to build diversified business models that provide sufficient financial resilience throughout the energy cycle, making them top choices for investors in the energy sector.
See More
Middle East Conflict Drives Oil and Gas Price Volatility
- Market Volatility: The geopolitical conflict in the Middle East has driven oil prices higher, and despite significant fluctuations, integrated energy giants like ExxonMobil and Chevron are expected to benefit from elevated prices in the near term, likely for several quarters.
- Financial Resilience: With ExxonMobil's debt-to-equity ratio at 0.19 and Chevron's at 0.25, both companies are positioned to utilize cash for stock buybacks or debt repayment, thereby strengthening their financial positions in preparation for a future with lower oil prices.
- Infrastructure Damage: Damage to energy infrastructure due to the conflict will take time to repair, creating bottlenecks that won't be resolved overnight, which is likely to positively impact the earnings of both companies in the coming quarters.
- Long-Term Strategy: The majority of Exxon and Chevron's assets are not located in the Middle East, and both companies are increasing their investments in the onshore U.S. oil sector to shield themselves from any lingering impacts from the region, demonstrating their long-term thinking approach that spans decades.
See More
Oil Prices Surge, Oil Giants Face Challenges
- Surge in Oil Prices: Brent crude oil skyrocketed by 94% in Q1, marking the largest quarterly gain since 1990, positioning oil companies for substantial profits, although not all firms fully benefited from this surge.
- Production Disruptions: Operations at ExxonMobil and Shell faced interruptions due to the Middle East conflict, with Exxon expected to see a 6% decline in global oil and gas production and Shell a 7% drop, directly impacting their financial performance.
- Long-term Loss Projections: ExxonMobil anticipates a $4.9 billion loss due to derivative accounting rules, while Shell expects a $15 billion hit to working capital, indicating significant financial pressure on both companies moving forward.
- Offsetting Effects of High Prices: Despite production declines and losses, ExxonMobil forecasts a $2.3 billion boost in Q1 earnings from rising oil prices, with Shell's earnings now expected to exceed initial forecasts by 10%, suggesting that elevated oil prices will help mitigate some negative impacts.
See More
Oil Prices Surge Due to War with Iran
- Oil Price Surge: Brent crude skyrocketed 94% in Q1, marking the largest quarterly gain since 1990, positioning oil companies for substantial profits in the first quarter, although not all firms fully benefited from the price increase.
- Production Disruptions: Due to the war in the Middle East, both ExxonMobil and Shell faced operational disruptions, with global oil and gas production expected to decline by 6% and 7% respectively in Q1, negatively impacting their financial performance.
- Facility Damage: Iranian attacks damaged two liquefied natural gas (LNG) trains in Qatar, representing 17% of its production capacity, with repairs expected to take three to five years, exacerbating production challenges for ExxonMobil and Shell.
- Financial Impact: Despite production declines and losses, ExxonMobil anticipates a $2.3 billion boost in Q1 earnings from rising oil prices, while Shell's earnings are now expected to be 10% higher than initial forecasts, indicating that elevated oil prices are supporting profitability.
See More
Fragile Truce Leaves Strait of Hormuz Traffic Uncertain
- Slow Recovery: Despite a fragile ceasefire between the U.S. and Iran, traffic through the Strait of Hormuz remains stagnant, with only four transits recorded on Wednesday, indicating a lack of market confidence that could prolong global energy supply issues.
- Vessels Anchored: Over 400 oil tankers and dozens of LNG carriers are still anchored outside the Gulf, awaiting passage signals, which suggests that transit capacity has not returned to pre-war levels, impacting the stability of the global energy market.
- Risk Assessment Impact: Hapag-Lloyd states that returning to normal shipping schedules will take weeks or even months, as hundreds of thousands of containers remain at ports, highlighting the industry's uncertainty about future transport arrangements and potential cost increases.
- Market Dynamics Shift: Analysts note that while oil prices have dropped from $110 to $97, they are expected to remain above pre-war levels due to supply disruptions, reflecting the market's reliance on the Strait of Hormuz and its associated risks.
See More
Trump Reaffirms Tough Stance on Iran Amid Fragile Ceasefire
- Military Deployment Continues: Trump stated that U.S. military forces will remain deployed in and around Iran until Tehran fully complies with what he calls the 'real agreement', indicating a sustained U.S. military presence in the Middle East that may escalate regional tensions.
- Escalating Threats to Iran: Trump warned that any breach of the agreement would trigger a military response larger than ever seen before, which could raise market concerns about potential disruptions in energy supplies, thereby affecting oil price volatility.
- Strained NATO Relations: Trump criticized NATO for not supporting the U.S. when needed, highlighting a deterioration in relations with traditional allies that could impact future international cooperation and security policies.
- Iran Accuses U.S. of Violating Agreement: Iran's parliamentary speaker accused the U.S. of violating the two-week ceasefire agreement, citing actions such as Israeli attacks on Lebanon, which could further deteriorate U.S.-Iran relations and affect global market stability.
See More
Middle East Conflict Drives Oil Prices Up
- Oil Price Impact: The geopolitical conflict in the Middle East has driven oil prices higher, creating significant revenue and earnings benefits for integrated energy giants like ExxonMobil and Chevron, with expectations of elevated prices lasting for several quarters despite volatility.
- Financial Strategy Adjustments: Both companies may leverage their substantial cash flows to pay down debt and repurchase shares, thereby strengthening their financial positions, particularly as Chevron has slightly increased its leverage following the acquisition of Hess.
- Market Adaptability: While both firms have some exposure to the Middle East, they are increasing investments in the onshore U.S. oil sector to mitigate potential impacts from the conflict, ensuring business stability and resilience.
- Long-Term Development Perspective: ExxonMobil and Chevron's strategic outlook spans decades, allowing them to build diversified business models that provide sufficient financial resilience throughout the energy cycle, making them top choices for investors in the energy sector.
See More
Middle East Conflict Drives Oil and Gas Price Volatility
- Market Volatility: The geopolitical conflict in the Middle East has driven oil prices higher, and despite significant fluctuations, integrated energy giants like ExxonMobil and Chevron are expected to benefit from elevated prices in the near term, likely for several quarters.
- Financial Resilience: With ExxonMobil's debt-to-equity ratio at 0.19 and Chevron's at 0.25, both companies are positioned to utilize cash for stock buybacks or debt repayment, thereby strengthening their financial positions in preparation for a future with lower oil prices.
- Infrastructure Damage: Damage to energy infrastructure due to the conflict will take time to repair, creating bottlenecks that won't be resolved overnight, which is likely to positively impact the earnings of both companies in the coming quarters.
- Long-Term Strategy: The majority of Exxon and Chevron's assets are not located in the Middle East, and both companies are increasing their investments in the onshore U.S. oil sector to shield themselves from any lingering impacts from the region, demonstrating their long-term thinking approach that spans decades.
See More
