Does Exxon Mobil (XOM) offer a good investment opportunity right now?

Investors recently received positive news from Exxon Mobil (XOM) in their investment report as oil production grew 3%, profitability increased, and dividends continued. However, a press conference was held on May 18 to announce an end to all new oil and gas drilling. There is no competition for Exxon in solar and wind power.

 As a result, XOM stocks are up 46.6% since January 2021 and 67.5% in the last six months, as oil prices rise amid rising global economies following the COVID-19 pandemic. A recent quarterly report of Exxon Mobil for the first quarter, published on April 30, provided additional optimism. 

Exxon Mobil beat both earnings and earnings estimates, beating both Wall Street and Wall Street expectations. A quarter earlier, the largest US oil company suffered losses of $ 20.1 billion while earning $ 2.7 billion in the first quarter of 2021. Exxon kept its capital expenditures between $16 and $19 billion during this period while lowering costs and maintaining dividend payouts at 5.9%, on average. 

CEO Darren Woods said the company’s operating cash flow rolled over dividends and capital expenditures in the third quarter while reducing its debt.

 On Tuesday, the bad news for Exxon investors was the release of a report by the International Energy Agency (IEA) titled “Net Zero by 2050. A roadmap for the global energy sector”. As part of the commitment to preventing global warming by more than 1.5 degrees Celsius, the IEA has changed its rhetoric to “stop new drilling” rather than “reduce the number of petroleum fields in the world.”

The report emphasizes that achieving this goal will not be accessible but achievable after 2021 to avoid new oil and gas fields or new coal mines.

President Biden unveiled a 10-year climate program last month to reduce US greenhouse gas emissions by 50-52% by 2030, the most ambitious of its predecessors. Exxon is under pressure from activist firm Engine No. 1 and others to replace Woods’ CEO and board with executives who can manage climate risks and move the company toward a lower carbon footprint in the future.

According to Woods, Engine No. 1 is not particularly interested in finding out how Exxon can increase shareholder value as it transitions to a low-carbon future.

In his view, “They are pushing us to scale back investments and shut down businesses in favor of just going solar and wind,” Woods said. 

At the company’s annual shareholders meeting in 2021, the board of directors will vote on May 26. According to the IEA, oil and gas exploration will cease, but production in existing fields will grow. The oil price may rise further in the medium term, supporting Exxon Mobil (XOM) and other oil companies’ stocks. The long-term global trend and forecast predict a decline in demand for oil and gas over the coming years.

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