With oil prices still high–despite a small and likely short-lived dip–and gas prices looking even worse, it must have come as a surprise to investors to find that oil giant Exxon Mobil (XOM) was planning to sell off some of its assets in the Permian Basin. It was not a pleasant surprise, either, as investors did some selling of their own, sending Exxon Mobil shares down fractionally in the closing minutes of Tuesday’s trading.
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The reports noted that Exxon Mobil is poised to sell off oil assets in the Permian, a move that includes several older wells that are producing stable amounts of oil but small amounts overall. Exxon, meanwhile, wants to focus its efforts on shale production, which it is in a good position to do following its purchase of Pioneer Natural Resources a year ago.
The move, reportedly, could fetch around $1 billion and would go quite a long way toward letting Exxon expand its shale operations. But such a deal does depend on oil prices, and if those go down significantly, the value of Exxon’s oil properties will be lessened accordingly.
A Good Time to Sell?
This move actually comes at a good time for Exxon Mobil. It just released its forecasts suggesting that demand for oil in 2050 will be approximately the same as it is today. Interestingly, that is actually 25% higher than the estimates released by competitor BP (BP), who looked for a significant drop in oil demand in 25 years.
With Exxon Mobil already out to be the most ambitious among major oil companies, it is little surprise that its demand forecasts are significantly higher than the competition. After all, it wouldn’t expand its shale operations if it thought demand was likely to sink.
Is Exxon Mobil a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on XOM stock based on 11 Buys and five Holds assigned in the past three months, as indicated by the graphic below. After a 10.86% rally in its share price over the past year, the average XOM price target of $137.13 per share implies 16.44% upside potential.
