*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

Here's the podcast episode for this post

Exxon Mobil, one of the largest oil conglomerates in the world, has been through a lot. With oil prices plunging and tons of investment in new ventures, Exxon Mobil has been showing minimal profits to losses over the past few years. The company once had a credit rating stronger than the US government. Because oil prices have plunged and uncertainty continues to cloud the oil industry, Exxon Mobil's credit rating has been downgraded numerous times. In April, Moody's downgraded the company's credit rating from Aaa to Aa1. It's still high grade, but that downgrade has stirred worry for investors.

As the company struggles to make ends meet, many have been talking about a potential dividend suspension by the company. The company is a dividend aristocrat but that title will be taken away if they cut the dividend. Currently, the company offers a 7.82% dividend while its peer, Chevron, offers a 5.89% dividend. It might be worrisome and it might signal opportunity.

With all the bearishness going on with Exxon Mobil, here's my opinion about the company.

Because the company still a high-grade credit rating, I think that the company still has a low chance of bankruptcy. While they've been accumulating debt despite experiencing negative free cash flow, I find it to be temporary. The company has been investing a lot in investing in new oil production ventures. Once they go operational, they'll be gushing with cash.

Oil prices might be low and Exxon relies a lot more on its upstream operations than downstream operations but I believe that oil prices might come back higher. COVID-19 has not only led to an oversupply of oil but also led to the shutdown of oil production in many places. As reopening happens, demand for oil will skyrocket but because many oil drilling operations will still be closed, that oversupply of oil will soon go away.

It's been a trend for quite some time that oil drilling has been decreasing. While it has been increasing in the US shale fields, it has been decreasing in other places. Venezuela, one of the largest oil producers and a member of OPEC, has drastically shut down most of its oil production facilities because of the unrest happening in the country. Unrest in the Middle East won't be worrying oil traders in the meantime because of the oversupply but if things do get worse, then the supply of oil will drastically decrease. Also, because oil prices are still at levels where drillers can't make profits and because many drillers are over-leveraged and unprofitable, a wave of bankruptcies are happening in the oil fields. All of these will drastically reduce oil output.

And there's another thing you need to remember about Exxon Mobil. Their management team has years of experience in the energy sector. They know how to navigate through all the stages of the commodities cycle. Since things are low, they're heavily investing now so that way they can start reaping huge gains once oil goes higher. Management is underrated.

Overall, I believe that Exxon Mobil will do well in the future. Their great management team will help the company navigate through the lows of the oil cycle and will position the company to capitalize when things get better. With a strong credit rating and improving fundamentals, it looks like the skies are clearing for Exxon Mobil.