Exxon Mobil Corporation (XOM) Outperforms Peers When Oil Prices Decline

January 4, 2013

Exxon Mobil Corporation (XOM) is expected to outperform riskier oil and gas peers through its defensive oil-production strategy in a year where oil prices are are already correcting and are expected to decline due to supply outstripping demand, says Pavel Molchanov, Analyst at Raymond James & Associates, Inc.

“Quite simply, Exxon is a stock that tends to outperform when oil prices are choppy or declining. Conversely, if we thought oil was going to rip higher next year, this would be not be a stock that we would be overly excited about, because by definition it is very defensive and conservative,” Molchanov said.

Molchanov says XOM can fund its entire capital program and its entire dividend payout and still have cash left over to do share repurchases this year, something that sets it apart from the rest of the riskier approach of most oil and gas companies, and he says production was in fact down in 2012.

“[Exxon Mobil is] just a fundamentally well-run, conservatively managed company, and precisely because we think oil has downside next year, we have long been encouraging investors to gravitate towards defensive stocks like this one with solid dividend yields and balance sheets,” Molchanov said.