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Exxon Mobil (XOM) Is Granted Colorado R&D Lease From Bureau of Land Management

Stocks in this article: XOM

NEW YORK (TheStreet) -- Exxon Mobil (XOM) has been granted approval by the U.S. Bureau of Land Management to begin oil shale research and development projects in Colorado.

The tentative approvals are for research, demonstration and development leases on federal land in Rio Blanco County. This is the oil company's second attempt to extract petroleum from the oil shale in the region after it shuttered its Colony project in Colorado in 1982, costing the state 2,000 jobs in the process. The project still needs to be reviewed by the Colorado Division of Reclamation, Mining and Safety before it receives final approval. 

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Exxon Mobil is proposing a development project that requires the heating of the oil shale underground and then the pumping out of that oil. The process is different from the Colony project which involved surface mining and heating of the oil shale.

Royal Dutch Shell (RDS.A) and Chevron  (CVX) hold leases for development on the land in the area but both have already ended their oil shale projects.

Exxon Mobil was up 0.6% to $94 on Monday.

TheStreet Ratings team rates EXXON MOBIL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about its recommendation:

"We rate EXXON MOBIL CORP (XOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • XOM's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that XOM's debt-to-equity ratio is low, the quick ratio, which is currently 0.53, displays a potential problem in covering short-term cash needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.8%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • EXXON MOBIL CORP's earnings per share declined by 13.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, EXXON MOBIL CORP reported lower earnings of $7.37 versus $9.70 in the prior year. This year, the market expects an improvement in earnings ($7.59 versus $7.37).
  • In its most recent trading session, XOM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: XOM Ratings Report
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