XOM's Record Quarter Met With Skepticism

As for production, in October, Exxon Mobil began expanding the oil production in Kazakhstan. At full capacity, this will yield 285,000 barrels per day. In January, the company started up production on another field in offshore Angola. In the fourth quarter, the company announced plans to seek regulatory approval for a liquid natural gas terminal 20 miles off of the New Jersey coast, and it signed with Libya for an exploration and production-sharing agreement.

XOM Preview: Facing Short-Term Difficulties

Exxon Mobil (XOM - commentary - Cramer's Take) reports fourth-quarter 2007 results before the market opens on Friday and will follow up with its quarterly conference call later that morning.

The world's largest integrated oil, gas and chemical company is expected to earn $1.95 per share on revenue of $114.89 billion. In the year-ago quarter, Exxon Mobil earned $1.69 per share on net revenue of $90.03 billion. For full-year 2007, the company is expected to earn $7.12 per share, an 8.7% increase over 2006 EPS of $6.55.

While Exxon Mobil has delivered a string of back-to-back disappointing quarters, the stock tends to trade in tandem with energy prices rather than on earnings. The energy stocks had a nice run as crude oil finally printed $100 per barrel but, ever since, have declined along with the crude market and the large-cap stock indices.

Most of the recent disappointments from Exxon Mobil have come from its upstream (sales and distribution) units. Declining natural gas realizations and slowing volumes due to the domestic economic slowdown may once again make the upstream business a challenging endeavor. As far as the downstream or refining business goes, one may have to look at the recent results from Marathon Oil (MRO - commentary - Cramer's Take), which just this week reported that its fourth-quarter refining margins declined.

Exxon Mobil may also see some weakness from its chemical unit in the U.S. as the economy weakens, but that may be more than made up from international chemical strength. What I am saying is that Exxon Mobil is facing some short-term difficulties that may result in another earnings disappointment.

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At the time of publication, Rothbort was long Marathon Oil, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.