Should You Invest in Exxon Mobil?

PHOTO CREDIT: Exxon Mobil

OVERVIEW

Exxon Mobil Corporation is a company based in the United States. The company explores for and extracts crude oil and natural gas around the world. The company operates upstream (extracting oil, natural gas, and other energy), downstream (refining of these products into gasoline, petrochemicals, etc.), and chemicals. The company was founded in 1870.

Why You Should?

  1. Exxon Mobil is a great reopening play in an investor’s portfolio. The pandemic reduced the demand for the company’s products as people stayed indoors and as the industrial economy shut down. However, once this pandemic is over, the company will see strong demand for its products as economies around the world reopen.
  2. Exxon Mobil is one of the world’s largest oil companies. This will help the company grow its business and will unlock new growth opportunities for the company as well. For example, unlike smaller company’s who struggled during the pandemic, Exxon Mobil was able to weather the blows during this time due to their strong chemical business. This will benefit investors as well.

Why You Should Not?

  1. Exxon Mobil faces tough competition in the oil and gas industry. Some of these competitors include BP, Royal Dutch Shell, Saudi Aramco, and Chevron. This competition might hurt the company and its investors in the future.
  2. The COVID-19 pandemic might hurt the company and its investors in the short to mid-term. As people stayed indoors and as the industrial economy shut down, the company saw a drop in demand for oil and chemicals. Concerns about the Delta and other variants might continue to depress demand for oil and other chemicals in some markets as well. This will hurt investors as well.
  3. In my opinion, oil is not the future of the energy business. Other energy technologies (electric cars, solar, wind, and hydropower) have started to transition the world to clean energy sources like electricity. As people around the world transition to these forms of energy, Exxon Mobil will see the oil demand continue to decrease. This long-term outlook will hurt the company.
  4. Exxon Mobil also has to deal with a negative political environment. Under a Biden administration, the company will have to face higher fines for breaking environmental laws, more regulation, as well as more competition from clean energy companies like Tesla. This will cause the company to see a further decrease in demand for oil in the long term and will also hurt investors.
  5. In my opinion, if you are interested in investing in an oil and gas company, I would recommend looking into other companies due to Exxon’s weaker balance sheet as compared to its competitors. I think that Chevron is a better investment due to their investments in natural gas and LNG (cleaner forms of energy than oil). Chevron also has a better balance sheet.

MY OPINION

I think that Exxon Mobil is not the best long-term investment due to tough competition, negative impacts from the pandemic, a weak long-term outlook on the oil industry, a negative political environment, as well as better investment options. However, the company is a great reopening play and can use its scale to unlock new growth opportunities in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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