Since the start of the year, the conflict in Iran has disrupted oil and gas markets, created supply bottlenecks, and driven oil prices higher. These disruptions have been a tailwind for oil and gas producers.
As a result, if you had invested $1,000 in ExxonMobil (XOM +0.31%) stock one year ago, that investment would be worth $1,432 today.
ExxonMobil’s earnings have surged amid heightened geopolitical tensions
This year has been volatile for the oil and gas industry, as the Iran conflict has disrupted the Straight of Hormuz, through which over 20 million barrels per day of crude oil, condensate, and refined petroleum products pass.
For ExxonMobil, the disruptions have been a boon. Brent crude oil has traded as high as $120 per barrel and has stayed above $70 per barrel since the conflict began.
This has driven strong upstream growth, but an even bigger driver is downstream refined fuels, where margins (crack spreads) have surged. For ExxonMobil, the world’s largest non-state-owned refiner, this translates into significant downstream profits.
Through Sept. 30, Exxon’s upstream earnings jumped 16% to $20.8 billion, driven by higher crude oil prices. Meanwhile, its downstream energy products earnings have surged 181% to $11.4 billion, driven by strong refining margins.
Exxon has focused on investing in efficient assets that lower its breakeven cost
ExxonMobil has taken steps over the past several years to invest in cost-efficient, “advantaged assets” that help drive down the cost per barrel for oil. By focusing on these highly profitable assets, the company aims to lower its breakeven cost per barrel to $35 by 2027 and $30 by 2030, so even if oil prices retreat from their current highs, Exxon can keep profiting.
All that suggests this is a stock worth a closer look for potential addition to your portfolio.
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SOURCE: fool.com