Energy giant Exxon Mobil (NYSE:XOM) is creating a global trading division to capture additional profits through energy derivatives and compete better with European rivals like BP (NYSE:BP) and Shell (NYSE:SHEL), as well as commodity trading houses like Glencore (GB:GLEN) and Trafigura. As per an email to employees, cited by multiple sources, Exxon’s Global Trading division will be formed later this year.
The company did not provide any specific details related to the hiring and capital commitments for the new division. The global trading division will bring together “expertise from across the company in global crude, products and feedstocks, natural gas, power and freight trading,” as per the email cited by Financial Times. Exxon is generally known to be conservative and has avoided speculative trading, unlike its European peers, who have been more aggressive about energy and derivatives trading.
The formation of the new global trading division is part of Exxon’s reorganization plans, under which it will be combining smaller groups into three main units. As part of its reorganization, the company is creating a new unit to centralize financial services, procurement, and customer service. It is also forming a supply chain division to merge logistics, materials management, and other groups to streamline its supply chain and reduce costs. Both these divisions will be formed in May.
Exxon’s reorganization efforts will help it drive further cost savings. The company has delivered nearly $6.9 billion in structural cost savings compared to 2019 and is on track to meet its target of $9 billion in cost reductions by 2023-end. Exxon generated a record net income of $55.7 billion in 2022, up 142% from the prior year. The Russia-Ukraine war and solid demand following the reopening of the economy helped in driving stellar results.
What is the Target Price for Exxon Stock?
Wall Street is cautiously optimistic about Exxon, with a Moderate Buy consensus rating based on 11 Buys, seven Holds, and one Sell. The average XOM stock price target of $125.28 implies nearly 10% upside potential. Shares have advanced nearly 4% since the start of 2023 but have rallied about 45% over the past 52 weeks.
