Exxon Mobil, the Texas-based oil giant, reported early Thursday that its second quarter profit fell a larger-than-expected 66% as a result of weak demand, shrinking margins, and lower fuel prices. Excluding one-time items (such as a $140 million charge related to punitive damages in the Exxon Valdez case), earnings fell from $2.27 per share last year to 84 cents according to the Wall Street Journal. Analysts polled by Thomson Reuters were expecting earnings of $1.02 per share.
The energy sector as a whole has been under pressure in the wake of lower demand following lat year’s commodity price surge. Exxon has a strong balance sheet, and is widely believed to be in excellent position to weather any storm. Perhaps the largest worry relates to the ability of Exxon’s partners to complete major projects on time in the face of the economic crisis.
While XON shares will no doubt be in focus throughout the day on Wall Street, several energy ETFs could see some unusually high volumes and price swings as well. Here’s a look at three funds worth keeping an eye on:
- SPDR Select Sector Fund (XLE): Exxon Mobil accounts for about 22.8% of XLE’s holdings, making this fund very reliant on the oil giant. XLE has gained about 3.5% in 2009, but is still down more than 35% over the last year.
- Vanguard Energy ETF (VDE): VDE holds more than 1.9 million shares of Exxon, making the company this fund’s largest holding by a wide margin. With an expense ratio of only 0.25%, VDE is one of the most cost-efficient ways to make a play on the energy sector.
- PowerShares Dynamic Energy (PXI): PXI offers much more diversified exposure to the energy and utilities sectors, with XOM accounting for only about 2.6% of its total holdings. PXI has returned more than 20% so far in 2009.
Investors looking for inverse exposure to the energy sector may want to consider ProShares Short Oil & Gas Fund (DDG). This ETF seeks to return the inverse of the Dow Jones U.S. Oil & Gas Index (in which XOM has a weighting of about 31%).
Disclosure: No positions at time of writing.