Q. I own shares of Exxon Mobil Corp. Now don't get me wrong, I am pleased with them. But I wonder how long good times for the oil companies can continue.
D.R., via the Internet
A. Oil always will be an unpredictable commodity, which makes it difficult to accurately forecast the length of the positive cycles of these companies and their stock.
High crude oil prices are responsible for their latest bull run, while the efficiency of the world's largest and most profitable oil and gas company is keeping it in the lead.
Formed by the 1999 merger of Exxon and Mobil, it has a presence in more than 200 countries and is receptive to making deals. Exxon Mobil and Saudi Aramco, the Saudi Arabian oil company, recently announced a joint $3.5 billion refinery and petrochemical deal with China Petroleum & Chemical Corp.
Shares of Exxon Mobil (XOM) are up about 13 percent this year, after gains of 25 percent last year and 17 percent in 2003. It is using its substantial excess cash to offer a 2 percent dividend and to buy back its own stock.
Despite a decline in production, profits increased 32 percent to a record $7.6 billion in its most recent quarter, those results aided by strong refining and marketing margins. The firm's economies of scale, cost controls and technological know-how have put it in the driver's seat.
But many of its oil fields are maturing and its exploration for new oil increasingly requires going into difficult areas and unstable countries.
The consensus recommendation on shares of Exxon Mobil is currently a "buy," according to Thomson Financial. That consists of eight "strong buys," six "buys" and four "holds."
Exxon Mobil earnings are expected to increase 21 percent this year versus the 25 percent projected for the industry. The forecast for a decline of 1.5 percent next year compares with a predicted decline of 1.8 percent industrywide.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney @tribune.com.