If You Own Shares of Exxon Mobil, Read This

NEW YORK (TheStreet) -- The beginning of this year has been hard on investors of big energy companies  ExxonMobil (XOM), Chevron (CVX), and EOG Resources (EOG). From their 52-week highs these major integrated oil and gas companies are down anywhere from 11.5% to almost 15% so far.

Now, a group of investors have filed shareholder proposals pressuring five major oil and gas companies, including the three mentioned above, to disclose progress in reducing the impacts of their hydraulic fracturing (fracking) operations. The proposals target companies that received failing scores in a recently released report, and addresses the most controversial aspects of hydraulic fracturing.

The proponents of the shareholder resolutions represent environmental and social investors, as well as a leading public pension fund, the New York State Common Retirement Fund. Although from a publicity standpoint all news is good news, the energy sector has spent billions over the years trying to look environmentally responsible and a friend of nature.

Lucia von Reusner, the Shareholder Advocate at Green Century Capital Management, sent me the following news release that tells the story well:

"ExxonMobil, Chevron, EOG Resources, Occidental Petroleum (OXY), and Pioneer Resources (PXD) received shareholder resolutions from a coalition of investors concerned about the lack of reported progress in mitigating the risks associated with company hydraulic fracturing operations. The resolutions target companies that received failing scores... on their disclosed efforts to measure and mitigate the impacts of their hydraulic fracturing operations on communities and the environment."

On the other hand, Robert Rapier, the chief analyst for The Energy Strategist, who accompanied me this past summer when I flew to Alaska to inspect a small energy company's operations, recently noted that most people "still don't understand how much more oil is ready to come out of the ground. If you think fracking was revolutionary, wait until you read about a technique that can extract nine times the amount of oil that traditional drilling rigs can get at."

Robert had mentioned this process called "CO2 Injection," which is an enhanced recovery technique. The Energy Information Administration says CO2 injection could unlock up to 60 billion barrels of oil. At $100-a-barrel that's $6 trillion of oil.

Will CO2 injection be harmful to the environment and to the communities in the vicinity of this enhanced recovery technique? If so, the news about this coalition holding the energy companies' feet to the fire could have ongoing repercussions.

ExxonMobil, Chevron, EOG Resources and Occidental Petroleum received failing scores in a recently released report scoring companies engaged in hydraulic fracturing on disclosed operational impacts and mitigation efforts.

The report targets a total of 24 companies that use hydraulic fracturing against 32 indicators relating to management of toxic chemicals, water and waste, air emissions, community impacts and governance. ExxonMobil, Occidental Petroleum, Chevron and EOG Resources, scored points on just two, two, three, and six out of 32 indicators, respectively.

Those scores and this topic are grabbing the attention of all sorts of investors and demographics. If these protestors feel a responsibility for how their money or the money of their organizations is invested, this topic becomes as hot as a burning blow-off of natural gas.

For instance, here's Nora Nash, director of Corporate Social Responsibility at the Sisters of St. Francis of Philadelphia:

"As Chevron drags its feet, vulnerable communities across the country continue to bear the health and environmental impacts of hydraulic fracturing, with little evidence that one of the world's largest energy companies is managing its footprint on local health and well-being", Nash concluded.

Will this have an impact on the stocks of the companies mentioned? It's hard to say, but considering how much this energy group's shares have fallen already, it wouldn't surprise me if they have further to fall before this whole matter is resolved.

In the meantime, if you're looking for an alternative investment in the energy space you might want to consider ConocoPhillips (COP), where shares have also corrected from the 52-week high of $74.59 nearly 16% to an intra-day low on Feb. 5 of $62.74. At that price the company's dividend is yielding 4.4%.

Below is a chart showing the one-year price movement of ConocoPhillips. It also reflects the price pattern of the other energy companies mentioned in this article. I've included the trailing 12-month (TTM) Price to Free Cash Flow (orange line) to highlight a financial metric that can move a stock price up and down.

COP ChartCOP data by YCharts

At the time of publication the author had positions in CVX, OXY and COP.

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


Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial writer and editor, he specializes in unique investment strategies, growth with income stocks, overlooked investment themes, tax-advantaged themes, risk management, technologies to capture gains and reduce losses, real estate related opportunities,effective wealth preservation techniques, and the use of ETFs for diversification and asset allocation. He also follows and frequently writes about technology, health sciences, energy and resource companies. Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.

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