Will Growth Ever Return?
Without question, the most essential topic in this sector today is whether growth is gone for good. Given the production struggles that exist, it will require significant investments to find untapped oil resources. Granted, companies like Exxon and Chevron aren't lacking in cash to fund exploration projects. But they do risk losing their capital investments if oil and gas prices fall further.
Exxon, which already has high production relative to peers, is already suffering revenue declines due to weak prices of oil, which fell $8.66 per barrel from a year ago. Given the uncertainty that still remains regarding oil prices, will management risk throwing good money toward potentially bad projects only to further hurt profitability? Investors can't have it both ways.
This is not a risk I think that is worth taking at this juncture. However, there are other options, such as M&A, which can ignite growth in short order.
Management has to find the right opportunity and mix. In the meantime, there are still plenty of opportunities for Exxon to turn things around -- it's just going to take a little bit longer than investors would like.
Here's Making Sense
Exxon is still in the mix of all phases of upstream and downstream operations. That, along with the company's portfolio of exploration and production projects, should continue to benefit the company through these tough periods.
Lastly, the investment case for Exxon often comes down to safety. The stock is not going to excite investors with strong upswings, but it does present little to no downside risk. That, along with an excellent yield of 2.80%, makes this a "no-lose" situation.
At the time of publication, the author held no position in any of the stocks mentioned
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.