Exxon Mobil Corporation (XOM) Stock: Two Keys to Higher Returns

Growing production
If there is a rub against Exxon Mobil Corporation (NYSE:XOM), its the fact that its returns-focused business has delivered only meager production growth over the past decade. However, growth is expected to accelerate in the decade ahead. After a projected 1% decline in production this year, the company expects to grow production by a 2%-3% annual clip through 2017. More importantly, this growth will focus on higher margin oil and natural gas liquids projects.

I will point out that this production growth is a bit lower than some of its peers. ConocoPhillips (NYSE:COP) for example is expected to grow its production by 3%-5% annually over the same time frame. The difference here is that ExxonMobil is starting off a much larger base, and as the nation’s top natural gas producer, the company is focusing its growth on higher margin commodities while de-emphasizing natural gas production growth. This will go a long way to ensure the company can continue generating those exceptional returns on capital employed.

The Foolish bottom Line
Exxon Mobil Corporation (NYSE:XOM)’s formula of allocating its capital toward higher margin production should reward investors in the years ahead. If the company can execute on its growth plan, I see no reason why the stock won’t continue to outperform.

The article ExxonMobil Stock: 2 Keys to Higher Returns originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of ConocoPhillips. The Motley Fool recommends Chevron.

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