Exxon's Australian Expansion Keeps Stock On Bullish Trend
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There's a group of scientists that hypothesize that the dinosaurs of old sacrificed their mobility for an expansion or increase in size, making it hard for them to manage themselves effectively.
Perhaps you are not interested in that little bit of natural history opinion, but I am sure that you will be interested in fossil fuel producer ExxonMobil (NYSE: XOM), the largest oil company in the world, as far as market value is concerned. However, unlike the dinosaurs, ExxonMobil keeps growing and yet remains able to manage itself effectively.
Thus, it is not surprising that ExxonMobil has revealed that it would shift operations from its refining and marketing headquarters located Fairfax, Va. The move will see operations moving to a new and bigger campus located in the Houston suburb of The Woodlands. The relocation, which is expected to start by 2014 and reach the final stages a year later, will see some 10,000 employees working on a campus that spans some 385 acres.
While you may be wondering what the relocation has to do with the direction of the stock, it shows ExxonMobil's commitment to investing in its human assets. Having its operations in a central location, instead of a split between Virginia and its other Texas location, encourages a synergy of ideas and, according to an ExxonMobil spokesperson, will "provide an innovative and collaborative work environment and attract the best talent for the future."
As part of its never-ending expansion, another news outlet has linked ExxonMobil to the signing of a coal-seam-gas exploration deal in Victoria, Australia, with Ignite Energy. Although the details and monetary aspects of the deal are not yet available, it was reported that the deal would see ExxonMobil owning a 10% stake in exploration license of Ignite. The exploration would be carried out in the Gippsland Basin of southeast Victoria.
The deal is good for ExxonMobil because Australia is a geopolitically stable region, thus it's doubtful that the production plans will be disturbed by national conflict. These problems are too common to the many regions that are blessed with valuable natural resources. Current estimates hold that the exploration area potentially holds 16 billion metric tons of brown coal. Another good thing is that Australia's proximity to China presents a ready market once production operations commence.
In another related development, ExxonMobil is carrying out an assessment of the quantity of shale oil in Western Siberia. The assessment, being preformed in conjunction with state-owned Rosneft, will look at the economic viability of the shale oil reserves. According to Rex Tillerson, the chief executive at ExxonMobil, "There is huge shale potential in shale rocks in West Siberia...we just don't know what the quality is." There is also a probability that Exxon may want to have a share in the Russian Barents Sea Shtokman natural gas project. Mr. Tillerson was quoted saying that Exxon may be interested in cutting from the stakes of Total (TOT) or Statoil (STO) "on the right terms."
On the competitive side of things, Chesapeake (NYSE: CHK) may be on track to revolutionize itself for increased profitability. You will remember that Chesapeake is in its present predicament because of irresponsibility in corporate governance. However, with plans to replace four of its independent directors with four new independent directors who do not have prior relationships with Chesapeake, a change in corporate governance is to be expected.
Energy giants ExxonMobil and Shell (NYSE: RDS-A) have said that a transformation of the natural gas market by the United States may be the key to a significant improvement in the global economy. Mr. Tillerson in Kuala Lumpur made this observation when he said, "natural gas is quickly becoming a key enabler of economic growth and environmental progress around the world."
Notwithstanding, Exxon was quick to note that excessive government regulation of the energy sector may unwittingly stifle the expansion of gas output. You may remember that the Obama Administration is facing huge pressure from quarters calling for more government regulation of the energy sector. This is especially true when you consider the public outcries that surround issues such as the effects of exploration, drilling and refining on the environment as well as fears about a potential increase in the price of gas, especially when a substantial portion of the produced gas is being exported. However, in the words of Tillerson, "Regulations should provide a clear, efficient roadmap for how to get things done, not a complex tangle of rules that are used to stop things from getting done."
On the downside, a lawsuit claiming the contamination of wells and pipelines in the Pascoag district has been allowed to reach a settlement agreement with the consent of Superior Court judge. The settlement sees ExxonMobil paying a total of $7 million with $2 million going to the disrupted 1,300 homeowners, with the remaining $5 million going into the purse of the Pascoag public utility district to be utilized for installing new pipelines and wells. Thus, it is not surprising that ExxonMobil was chosen to receive this year's Responsible Care Company of the Year Award. The award, given by the American Chemistry Council (ACC), recognizes exemplary achievement in safety and environmental performance among other important parameters.
Conclusively, ExxonMobil remains a strong player in the industry. Without any doubt, ExxonMobil is set to continue its bullish trend given its commitment to increasing shareholder value.
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