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.