ExxonMobil and Chevron have been laggards on the Dow despite a booming domestic energy market. Here's why and why they're destined to be long-term laggards.
Text of Why aren’t exxon mobil and chevron dow leaders
Why Arent ExxonMobil and Chevron Dow Leaders?
XOM and CVX Are Trailing the Dow
The U.S. energy industry is booming, so why arent ExxonMobil
and Chevron beating the Dow?
U.S. Energy Is Booming ExxonMobil and Chevron are trailing the
Dow even though energy production is booming in the United
States.
But the Energy Boom Is Local, Not Global The problem is that
ExxonMobil and Chevron are global energy players. Worldwide oil
production is up only 4.6% over the past decade. The U.S. energy
boom is taking place in shale plays such as North Dakotas Bakken
and Texas Barnett and Eagle Ford.
As a Result, Smaller Companies Are Winning As a result of the
regional nature of the current energy boom in the U.S., smaller,
more nimble companies are winning. Kodiak Oil & Gas and
Continental Resources have grown much more quickly because of their
focus on shale instead of Big Oils more global approach.
Drilling For Oil Is Getting More Expensive Another factor
fighting growth and profitability is that new oil and gas fields
are being found in expensive formations such as shale and under
more than a mile of water. Image sources: Kodiak Oil & Gas and
ExxonMobil.
Refineries Dropping in Profitability Refineries are also
fighting higher oil prices. High oil prices may be good for
exploration and production, but they reduce profits in refineries,
where ExxonMobil and Chevron both have exposure. Over the past five
years theres been a trend of higher oil price,s but gasoline prices
havent kept pace. The result is lower refining profits.
Can the Tides Turn for Big Oil? Are Big Oil stocks ExxonMobil
and Chevron destined to be Dow laggards?
Trends Arent Looking Good A few major trends are working
against Big Oil. Energy consumption in developed countries is
falling, not rising. U.S. energy production is being driven by
smaller, more nimble companies. Big oilfield opportunities are in
expensive offshore or harsh climate locations.
Destined to Lag the Dow The headwinds facing ExxonMobil and
Chevron are too big to ignore. Not only is domestic production
being dominated by smaller players, but alternative energies also
loom on the horizon. Im afraid these stocks are destined to lag the
Dow.
There are clearly opportunities in U.S. energy if you play it
right, and the good news is that the government wants you to get in
on the action. Find out how to profit in our free report.
