Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) will significantly increase gasoline and diesel production at its Beaumont refinery in Texas after completing a $1.2-billion expansion planned about a decade ago, per a report by Reuters.

This will be the first major expansion to U.S. crude oil processing in about 10 years. The Beaumont refinery processes nearly 369,000 barrels per day of crude oil and manufactures 2.8 billion gallons of gasoline per year.

The commencement of a 250,000-bpd crude distillation unit (“CDU”) at the refinery is expected this month, making Beaumont the second-largest refinery in the United States. The CDU will increase the refinery’s capacity by 68%.

CDUs initially convert crude into feedstocks for other units at the refinery. The equipment will not generate big new volumes of gasoline and diesel instantly. The company plans to advance the new CDU slowly to cope with potential startup problems.

The refinery expansion is taking place when U.S. President Joe Biden has been urging refiners to produce more fuels or face penalties. The expansion will likely create 120,000 bpd of refined products, including gasoline, diesel and jet fuel, and supply feedstocks for its other Gulf Coast refineries.

ExxonMobil did not provide information about the initiation of the Beaumont Light Atmospheric Distillation Expansion (“BLADE”) project, a new processing facility. The company’s crude oil extracted from the Permian shale play in West Texas and New Mexico was planned to be processed by BLADE.

According to a U.S. Energy Information Administration report, six crude oil refineries in the United States have shut down, dropping the U.S. capacity from 18.98 million bpd to 17.9 million bpd since the onset of the coronavirus pandemic.

ExxonMobil’s Beaumont refinery expansion marks a return to the time of steady refining capacity gains through processing modifications and adding new equipment to existing facilities. The expansion will help rebalance global markets and reduce product cracks.

Price Performance

Shares of ExxonMobil have outperformed the industry in the past six months. The stock has gained 31.4% compared with the industry’s 27.9% rally.

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Zacks Rank & Key Picks

ExxonMobil currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nabors Industries Ltd. (NBR Quick QuoteNBR - Free Report) is one of the largest land-drilling contractors globally, conducting oil, gas and geothermal land drilling operations. NBR is expected to see an earnings rise of 58.5% in 2022.

Nabors' efforts to lower costs and concentrate on cash flows also bode well. The drilling contractor plans to limit the 2022 capex to $95-$100 million. Better-than-expected cost-cutting initiatives and a capital spending program could favorably impact Nabors’s ability to achieve expected operating results.

Helmerich & Payne Inc. (HP Quick QuoteHP - Free Report) is a major land and offshore drilling contractor in the western hemisphere, having the youngest and most efficient drilling fleet. HP is expected to see an earnings surge of 280% in 2022.

HP boasts a strong balance sheet, carrying $542.3 million in long-term debt. The company’s debt-to-capitalization stands at just 16.6% compared with many of its peers that are hugely burdened with debts.

Murphy USA Inc. (MUSA Quick QuoteMUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States. Murphy USA is expected to see an earnings surge of 80.9% in 2022.

MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer approved a repurchase authorization of up to $1 billion, which can be completed by Dec 31, 2026.