This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Russian Vodka Not Tasty for Exxon Ahead of Earnings

NEW YORK (TheStreet) -- It's time again for investors to focus on the quarterly earnings report of energy behemoth Exxon Mobil (XOM - Get Report).

Surely analysts will be locked and loaded on the company's production profile, while environmentalists will likely continue to shake their heads in disbelief over the company's staunch commitment to fossil fuels. Yet, now more than ever, onlookers may want to consider something else -- geographic risk may hurt production guidance considering Exxon's growing exposure to Russia.

My concern is growing that Exxon's strategy to go anywhere in order to boost oil production is making this stock more risky for investors. Specifically, I'm referring to the company's larger dependence on Russia to reverse a slowing production profile. If you aren't familiar with Exxon's presence in Russia, the company, through its Neftegas subsidiary, operates and owns 30% of one of the largest FDI spending projects in Russia (the upstream Sakhalin-1 in Far East Russia).

Also several months back, it announced a new joint venture with Rosneft to explore for a massive oil find in the Arctic Ocean. Exxon also now has plans to drill horizontal wells and boost flow from older wells in western Siberia, something the company is likely to address during its upcoming earnings call.

Considering the increased number of U.S. sanctions on Russian assets happening on a daily basis in recent weeks, Exxon needs to address its recent expansion into Russia and the company's commitment to the region, especially with growing political frailty currently between the U.S. and Russian governments.

There is already concerns the Kashagan oil project in Kazakhstan (just outside the Russian Federation), in which Exxon owns a 18% stake, will be further delayed until 2015. Exxon didn't give a timeline for Kashagan to be restarted on its last earnings call but it may not be able to ignore this when the company reports first-quarter earnings on Thursday.

Why is this so important? On top of any sanctions or protests that impede Exxon's presence in Russia, the Kashagan project was expected to eclipse the 1.5 millions barrels of oil per day that all of the company's subsidiaries generated last year

All of this has me thinking Exxon may need to lay off the Russian vodka and consider acquiring less geographical risky production from North American players. This makes me cautious on Exxon's valuation near term.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
XOM $75.07 0.00%
AAPL $113.29 0.00%
FB $91.01 0.00%
GOOG $630.38 0.00%
TSLA $248.48 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs