Energy Exxon Mobil Corporation (XOM): Russian Sanctions — A Dent for Company Revenues?

Exxon Mobil Corporation (XOM): Russian Sanctions — A Dent for Company Revenues?

Published By Blake Audett at October 17, 2016 10:17 am

With the relationship between the US and Russia persistently on a downhill, oil producer Exxon Mobil Corporation (NYSE:XOM) finds itself in a rather tumultuous phase.  As per latest updates, the energy giant has lost around $1 billion over the imposition of the Russian sanctions.

It has been only a while when Bob Dudley, CEO of BP plc (ADR) spoke of how the Deepwater Horizon movie has strained the energy company’s picture. In the case of Exxon, with the latest move, Stock News Today believes that CEO of the US-based company, Rex Tillerson, probably has a bigger reason to be saddened.

Having a history of about two decades with Russia, Exxon has a strong foothold in the country. To make further extensions in this presence, the oil company was to further implement plans to participate in the exploitation and exploration of the country’s Arctic shelf. However, with the imposition of US and EU sanctions on Russia over its support for rebels in Eastern Ukraine, Exxon was forced to delay its expansion plans.

As a result, the energy company started to lose out on revenues even on the already operative projects in the country, including several joint ventures with ROSNEFT OIL CO RUB0.01(RUB) as well as the flagship project Sakhalin-1. In addition, Exxon lost out on the future revenues too.

Separately, the Arctic project valued around $500 billion in total investments and what made the project specifically attractive for Exxon was the exemption of property taxes and export duties by Igor Sechin, CEO of Rosneft.

Analyzing the current situation, we believe that Exxon is left with two choices. Either it could wait for the sanctions to be lifted or it could fetch out for more opportunities. Having said that, the drawback that comes with waiting is that ironically, the sanctions seem beneficial for both countries with the Russians describing them as a “blessing.” Therefore, with the heated political tensions brewing between the two countries, it would be safer for Exxon to look elsewhere for new opportunities that would maintain its commendable reserve replacement rate of 101%.