Back to top

Image: Bigstock

Exxon Mobil to Invest $20 Billion on US Gulf Coast Facilities

Read MoreHide Full Article

Exxon Mobil Corporation (XOM - Free Report) recently announced its intention to make planned investments of $20 billion through 2022 to expand its chemical and oil refining plants on the U.S. Gulf Coast.

The investments, which will be made over a 10-year period, will involve major chemical, refining, lubricant and liquefied natural gas projects at 11 proposed and existing sites. These investments are anticipated to create thousands of new high-paying jobs and generate $20 billion in increased economic activity in Texas and Louisiana. To be precise, the investments are expected to create 35,000 temporary construction jobs and 12,000 permanent jobs.

We note that Exxon Mobil already began investments in facilities along the Texas and Louisiana coasts in 2013. These projects are expected to continue through at least 2022. Per the company, the scope of the projects is growing and the timeline is being extended. This highlights the company’s commitment of growing the Gulf initiative.

Exxon Mobil’s CEO Darren Woods said that the Gulf expansion projects are expected to provide long-term economic benefits to the region, including the creation of direct employment opportunities and the multiplier effects of the company’s investments.

Interestingly, Woods managed Exxon Mobil's refining division before becoming the company’s CEO two months back. Given his considerable experience of working in the sector, Woods is confident that the aforesaid investments would prove to be beneficial. Investments in the high-margin projects should help erase concerns from Wall Street that Exxon Mobil's growth potential – particularly in oil and gas exploration and production – is diminishing.

The spending across Texas and Louisiana will be benefited by cheap shale gas as this will facilitate the manufacture of plastics and other chemicals for export. The strategy is supported by the previous steps Exxon Mobil and peers had taken in the wake of the American shale expansion, which severely cut production costs.

Last month, Exxon Mobil announced its decision to increase spending for 2017 by 16% to increase operations, particularly in shale production, after the company posted a better-than-expected quarterly profit, aided by rising oil prices and lower costs.

The majority of the expansion will be in Beaumont, TX, with plans to grow polyethylene production, oil refining capacity and liquefied natural gas exports.

Exxon Mobil also will enhance its lubricant manufacturing capacity and is likely to construct a new refinery to yield ethane, a key material for chemical production.

Shares of the company have underperformed the Zacks categorized Oil & Gas-International Integrated industry in the last three months. During the period, Exxon Mobil shares lost 6.2%, while the broader industry registered a decrease of 1.5%.



Exxon Mobil carries a Zacks Rank #3 (Hold). Some better-ranked players in the same space include Denbury Resources Inc. , Sunrun Inc. (RUN - Free Report) and Pioneer Natural Resources Company (PXD - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Denbury Resources posted in-line earnings in the preceding quarter. It had an average positive earnings surprise of 212.50% in the four trailing quarters.

Sunrun posted a positive earnings surprise of 137.21% in the preceding quarter. It beat estimates in all the four trailing quarters with an average positive earnings surprise of 134.71%.

Pioneer Natural Resources posted a positive earnings surprise of 63.33% in the preceding quarter. It beat estimates in all the four trailing quarters with an average positive earnings surprise of 21.86%.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?

Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>