When oil prices fall, Exxon suffers less than you think
ExxonMobil's chemical works is bigger than Dow Chemical or DuPont
When oil prices fall, Exxon suffers less than you think
Joseph N. DiStefano
We know ExxonMobil as Big Oil: the largest U.S.-based oil company, the bossiest of the global Seven Sisters, and, often, the most-valuable U.S. stock (when it's not Apple Computer.) So the "30%-below-consensus oil price forecast for 2013" is bad for Exxon, no? Actually, not so very bad: Exxon's huge chemical works turn out to be "an excellent hedge for declining commodity prices," writes Pavel Molchanov, oil analyst at Raymond James & Associates. Counted as a "standalone company," Exxon chemical sales totalled $4.4 billion last year -- "82% larger than Dow Chemical ($2.4 billion), 26% larger than DuPont ($3.5 billion), and more than half" as big as the biggest chemicals-only company, BASF ($8 billion.) As oil prices fall, chemical inputs become cheaper, and chemical sales and profits provide a larger proportion of ExxonMobil profits. Total profits will drop with oil prices, but not so much as for Exxon's rivals, Molchanov concludes: "Exxon is the ony one of its peers whose cash flow, we project, will cover all of its 2013 capital program, without having to cut spending," plus dividends, and even some share buybacks.
In other words, Exxon is a smart company. Pretty simple.— kelprod2- Unfortunately for U.S. workers, most of the chemical business is based overseas, away from heavy-handed regulators.— Wilhelm Von Humboldt
- Wilhelm...governments in America are responsible for creating the unfriendly business environment, which has chased hiring and investment off shore. Once again and as always, government IS the problem and NEVER the answer. — kelprod2
bottom line: get long XOM— barry m goldwater- And how is it bad for the Exxon and the rest of us? Everyone should have contingency plans for any situation. Construction companies always do different types of work depending on the seasonal demands - winter jobs are different from what they do during the summer for obvious reasons. Same goes for farmers, etc. Anything to keep people and companies busy and productive. Again, nothing wrong with it. So why is it a "crime"?— hollandpa
- Yeah, the environmental... hole that is Indonesia, Malaysia, China etc is exactly where I want my kids to live and work. You people are friggin' so ideologically stunted in your thought processes it's frightening. Hey, Love Canal wasn't so bad - kids with 12 fingers and three eyes can do more work. ...— CiceroSpuriousDeodatus
