Energy’s global tiger can bear sanctions on Russia

HOUSTON – Losing money on possible economic sanctions in Russia isn’t likely to thwart Exxon Mobil Corp., the U.S. energy company with the biggest stake in a country under international pressure to release its grip on Ukraine.

“They take a fairly long view of things,” said Stewart Glickman, an equity analyst with S&P Capital IQ. Glickman noted that Exxon Mobil often forecasts energy demand — and by extension, its own financial heartbeat — out to 2040.

“If they discover there are some projects running into above-ground problems, I think they would be prudent about it and ship their people to other areas of the world,” Glickman said. “They’re taking a wait-and-see approach.”

Irving-based Exxon Mobil is building the largest offshore oil and gas platform in Russia,  off its east coast in the Sea of Okhotsk, and plans to pump its first barrels of oil from the facility this year.

It also expects to spend $3.2 billion in a hunt for what could be billions of barrels of oil in Arctic waters north of Siberia and in the Black Sea south of the Ukrainian province of Crimea, which Russian troops entered last month. That exploration is part of a joint venture with the Russian oil company Rosneft.

The two oil giants also agreed last year to test tight-oil reserves in Siberia, according to regulatory filings.

But Glickman and others said it’s hard for an interruption in any project —  even the 28,000-ton Berkut platform in the Okhotsk – to move the needle at a $400 billion oil giant that produces 4 million barrels of oil per day.

Eighteen days after Russian troops moved into Crimea,  it’s unclear whether retaliatory U.S. and European sanctions will expand beyond a handful of senior Russian officials. In a televised briefing at the White House on Monday morning, President Barack Obama left the option open.

“If Russia continues to interfere in Ukraine, we stand ready to impose further sanctions,” Obama said. “We’ll continue to make clear to Russia that further provocations will achieve nothing except to further isolate Russia and to diminish its place in the world.”

Exxon Mobil spokesman Patrick McGinn said company officials would not speculate on potential economic sanctions. But earlier this month, CEO Rex Tillerson said the  unrest in Ukraine  had not at that point had any effect on the company’s plans or activities.

“Nor would we expect there to be any, barring governments taking steps that are beyond our control that we cannot do anything about,” he said in a conference call with analysts on March 5. “We do not see any new challenges out of the current situation.”

For a company with such global reach, losing access to its operations in one area doesn’t mean much when oil hovers around $100 per barrel, said Fadel Gheit, an analyst with Oppenheimer & Co.

The U.S. has held economic and oil sanctions against Iran since 2010, barring American business activity in the region and prompting some of the world’s biggest energy companies to leave, gradually. Oil field service giant Schlumberger finished winding down its business in Iran last year after facing a U.S. probe into its activities.

The company, which has main offices in Houston, Paris and The Hague, Netherlands, followed fellow oil field services giants Halliburton and Baker Hughes, both based in Houston, in halting operations in Iran.

But Glickman, of S&P Capital IQ, said in terms of an impact to Exxon’s balance sheet, sanctions on Russia would almost be closer in comparison to recent, smaller conflicts in Egypt and Libya.

“It’s much less of an issue,” Glickman said, adding that the company has more financial leverage than its peers because its cash flow typically dwarfs what it spends each year. Exxon Mobil’s biggest issue in Russia isn’t politics, but falling estimates of production levels out of its projects, he said.

Exxon Mobil shares rose 85 cents Monday to $94.32 on the New York Stock Exchange.