Oil major ExxonMobil Corporation (XOM - Free Report) recently announced the mechanical completion of its new 1.5 million ton a year ethane cracker at its Baytown, TX complex. Production at the site is expected to commence in the April-June period of 2018. The commissioning process of the facility has also been initiated.
What Does the New Facility Hold in Store?
Regional Benefits: ExxonMobil started the construction of the ethane cracker in 2014, which generated at least 10,000 construction jobs in the locality along with 4,000 associated jobs. It is expected to add 350 new permanent jobs after coming online. Notably, the project is expected to contribute $90 million a year to local tax revenues when it becomes operational. The company expects to inject $870 million per year in local economic activities. The project is in line with the company’s $20 billion Growing the Gulf initiative, which spans 10 years.
Per John Verity, the president of ExxonMobil Chemical Company, “Our new ethane cracker will allow us to economically meet rapidly growing demand for high-performance polyethylene products around the world while continuing to sustain economic development and create jobs for decades to come.”
Benefits for the Company: The new multibillion-dollar development is expected to ramp up ExxonMobil's ethylene capacity by 1.5 million tons per year. The project signifies one of the largest U.S. Gulf Coast investments made by the company. The facility is expected to benefit the company's export initiatives and improve its global competitiveness. We expect the new ethane cracker to help ExxonMobil compete with Chevron Phillips Chemical Company LP's Baytown petrochemical project, a joint venture between Chevron Corporation (CVX - Free Report) and Phillips 66 (PSX - Free Report) .
Moreover, the two new high-performance polyethylene lines in Mont Belvieu, which became operational last year, will benefit from ExxonMobil's ethylene feedstock. The ethane cracker is expected to help ExxonMobil boost production of polyethylene.
Additionally, we expect the project to benefit the company’s Chemical segment in the coming quarters. Segment earnings increased $63 million on a year-over-year basis (excluding gains from U.S. tax reform) in the fourth quarter of 2017.
The company has plans to develop a petrochemical complex in San Patricio County, TX, which will involve creating a 1.8 million ton-per-year ethane cracker. The project will be a joint venture between ExxonMobil and Saudi Basic Industries Corp. or SABIC.
About the Company
Irving, TX-based ExxonMobil is the world’s largest publicly traded oil and gas firm. The company has a leading position in the energy industry owing to the size and diversity of its asset base, both in terms of business mix and geographical footprint. It has three operating segments: Upstream, Downstream, and Chemical.
ExxonMobil has lost 5.4% of its value in the last year against the 8.2% rise witnessed by the industry it belongs to.
Zacks Rank and Stock to Consider
ExxonMobil carries a Zacks Rank #3 (Hold).
A better-ranked stock in the oil and energy sector is Cabot Oil & Gas Corporation . It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX -based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to grow 36% year over year. Earnings for 2017 are expected to be up 342.9%.
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