On Monday, Exxonmobil stated that it had expanded its hydrocarbon capacity. This will help the chemical portion of the business boost profit as the expansion rolls out. The additional capacity should help grow earnings despite a drop in the oil and gas industry. The company has a long way to go before the stock can rebound back to previous highs.

New Capacity

Exxonmobil is making a push to increase its hydrocarbon capacity by 250,000 tonnes per year. It will roll out this change at a majority of its chemical plants in various sites. Some of these sites include: Belgium, Texas, Singapore, and several others. Why is Exxonmobil chemical rolling out the added capacity? It is doing so to continue to diversify its hydrocarbon fluid products.

The company is making a push to target a wide variety of markets that will require the use of several different types of hydrocarbon fluids. One of the company’s higher level products is the Exxsol ™ product. In addition, the company can expand upon other hydrocarbon fluid products such as Isopar ™ and Solvesso ™.

The increased capacity is not occurring because management felt that it was time for it to happen. It is happening for a few major reasons. The first reason is that demand has increased sharply. Demand for hydrocarbon fluids around the world is starting to take off.  That is because there is a higher than expected growth happening in the industrial sector around the globe. Secondly, it is not a bad thing for Exxonmobil to expand in this area.

Particularly for the fact that health and safety regulations are starting to become more prudent. Hydrocarbon fluids are not only efficient but they are far safer for the environment than several other oil products.

Earnings Increase

The whole goal of implementing higher capacity would be to see a boost in earnings. In the most recent earnings report, Exxonmobil posted a dramatic drop from the year prior. Year over year, its earnings had fallen by more than 40%. Of course, there was a $2 billion charge that the company had to write down that highly affected that percentage.

The charge was related to a less than stellar gas field in the rocky mountains. Exxonmobil earned $0.41 per share, while analysts were expecting at least $0.90 per share.

Net income for the company came in at $1.68 billion, far below the projected income of $3 billion. It is possible that a whole host of differentiated products from the chemical business could boost earnings.

Trading Exxonmobil

Exxonmobil has been trading lower by 10% year to date. The one year change isn’t all that encouraging either. Over a one year period the stock has been down by 3%.

A lot of this downturn in the stock has to do with lower oil prices. As oil prices recover the company’s earnings may start to see a rise. In turn, the Exxonmobil stock could start to trade higher. It may be a while though before the stock can possibly reach its 52-week high of $95.55. A lot of positive things will have to happen to see that much of a rise.

What Binary Options Traders Should Watch For

Traders should watch a few things.

The first of which is how the increased capacity improves sales. It will be prudent to see if expanding capacity generates an improvement of income. The wide variety of products should help in that regard.

The second item would be the earnings themselves. While the Exxonmobil chemical business capacity expansion is a good thing, there are other problems the company must resolve. One such item would be avoiding a lot of write downs on failed business prospects.

The final item that traders should watch for would be the next earnings report that is approaching. It will shed light on whether or not the lower price in oil is still placing a burden on earnings. There will have to be a major change seen in earnings to bring confidence back to the stock.