What happened

Shares of ExxonMobil (NYSE: XOM) were in rally mode in February, jumping 21.3%, according to data provided by S&P Global Market Intelligence. Several factors fueled the oil stock, including the continued rebound of crude oil prices.

So what

Oil prices surged last month. West Texas Intermediate (WTI), the primary U.S. oil price benchmark, rallied nearly 18%, closing the month above $60 a barrel, almost at a 22-month high. Fueling the surge in oil prices was the continued support of OPEC, which is holding back supply while demand recovers from the COVID-19 outbreak. That seems increasingly likely given the continued rollout of vaccines around the world.

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Higher oil prices are crucial to Exxon's strategy. Last year, lower oil prices forced Exxon to take a massive $19.3 billion writedown of its oil and gas assets, which it reported when it posted its fourth-quarter results last month. Weaker crude prices also cut into its operating cash flow, which declined 9% during the fourth quarter, putting its dividend at risk as the company piled on debt to bridge the gap. Last month, the oil giant stated that it needs oil above $50 a barrel to maintain its monster dividend. The 6.2%-yielding payout consumes $15 billion of cash per year.

Exxon took a step toward improving its financial profile and dividend sustainability last month by agreeing to sell most of its non-operated U.K. assets in the North Sea. It will receive $1 billion upon closing and up to an additional $300 million in contingency payments based on higher commodity prices.

Exxon also took a step toward the future by creating a new low-carbon business unit. The company plans to invest $3 billion in lower-emission energy projects through 2025, starting with additional carbon capture and storage projects. This business unit is the oil giant's first formal step to transition toward lower-carbon energy sources.

Now what

While Exxon is planning to invest more money in energy transition projects in the future, oil remains the main story. It benefited from the focus last month as oil rallied, giving Exxon's stock the fuel to soar because it took some of the pressure off its balance sheet and dividend. However, the economy is slowly weaning itself off of oil. That could weigh on Exxon in the coming years if the shift to cleaner fuel sources accelerates and the oil giant doesn't keep up.

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