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XOM Hedges Against Environmental Backlash Of Shale Oil Mining
- XOM is increasing its oil production capability despite low oil prices as CVX walks away from deals.
- This shows that XOM is proactively taking steps to protect its oil production capability as the environmental backlash against shale oil mining gains momentum while others are oblivious to it.
- When oil prices normalize, XOM will be a key beneficiary with its enhanced production capability regardless of the regulatory conditions of shale oil mining in the United States.
- The relentless drop in oil prices continued Thursday after a brief respite.
- For an untold number of reasons I believe we are nowhere near the bottom in oil presently. Yet, there is light at the end of the tunnel.
- A flight to safety of oil and gas dividend growth investment dollars may begin to occur as the price of oil continues to plummet.
- Exxon Mobil should be the beneficiary of this potentially massive shift.
- XOM is a terrific, well-diversified energy name with strong fundamentals.
- But with oil crashing continuously, earnings will be negatively affected.
- The dividend is solid, and is a separate reason to potentially own the stock.
- I think earnings estimates are too high and that XOM is worth around $80 right now.
The 'Immense Opportunity' Is Not In Exxon, It's In Small-Cap Oil Stocks
- Oil prices may not go as low as some expect and, even if they do, they probably will quickly rebound.
- The global economy appears poised for long-term growth, and the recent drop in oil prices is only likely to increase oil consumption and economic activity.
- Many investors are buying Exxon shares due to a slight pullback in that stock, but the really immense opportunity appears to be in small-cap oil stocks.
- The relative strength in Exxon could be a sign that oil is not going to see a significant additional decline.
- Small-cap stocks that have strong balance sheets, significant hedges, and even multi-year contract backlogs are worth buying now.
- ExxonMobil has outperformed its U.S. peers Chevron and ConocoPhillips during the latest oil price crash.
- ExxonMobil's size and free cash flow strength make the company extraordinarily attractive for investors.
- The company is an excellent bet on normalizing oil prices in the long run.
- Shares of ExxonMobil now yield more than 3%.
Retirement Strategy: Selling Exxon Mobil Goes Against The Grain Of A Dividend Growth Investor
- Dividend growth investors can create wealth just by virtue of the increasing dividends from dividend aristocrat stocks.
- Not to buy a dividend aristocrat is perhaps the worst advice a dividend growth investor can get.
- There are 54 stocks that are dividend aristocrats. Owning them over the long term would have made you wealthy and I believe will continue to do so.
- While Exxon has outperformed over the past six months, now is the time to take profits and rotate out of its stock.
- Exxon has been unable to generate production growth despite a large capex budget, and free cash flow does not cover shareholder returns.
- At 14.9x earnings, Exxon's stock does not reflect the company's weak operating performance, and I would sell shares.
- Exxon Mobil's resource base is now higher than ever, at 90bn BOE.
- Disciplined investment is delivering higher margins and returns.
- Among its peers, XOM is the most resilient in the face of a falling crude oil price.
- 9% CAGR in free cash flow between 2014 and 2018 fully covers the dividend.
- Exxon Mobil and Chevron make for good long-term investments at current prices for a number of reasons.
- Energy demand is expected to rise in the future, and Exxon Mobil and Chevron are in excellent positions to accommodate this growing need with their vast reserves.
- Both companies have integrated business models, in which the downstream segment can provide a cushion for earnings in the face of lower oil prices.
- Both companies have a long history of earnings and dividend growth, strong balance sheets, and dividend yields that are currently at their highest levels in a long time.
Exxon Mobil: A Massive Buying Opportunity? Don't Drink The Kool-Aid
- There has been a tectonic shift in the oil patch as of late.
- The price of oil has sunk to multi-year lows on the back of news OPEC will not cut production and the incredible success of North American oil and gas production.
- Consequently, Exxon Mobil’s stock has taken a hit as of late. Several analysts have come out touting this is an excellent buying opportunity.
- I say not so fast. In the following article we will attempt to determine the truth regarding the opportunity Exxon Mobil offers dividend growth investors.
Time To Snap Up The Immense Opportunity In Exxon Mobil Corporation
- Unlike other U.S. oil companies, Exxon Mobil is uniquely positioned to weather low prices. The current share price slip is therefore a buy opportunity.
- Most U.S. producers have hedged at around $90 a barrel. When these arrangements expire, most producers will run out of business, considering that low crude prices are expected to persist.
- When this happens, a lot of investments will flee from shale producers to other more stable plays in the energy sector.
- Exxon Mobil’s profile makes it a prime candidate for the fleeing capital, suggesting strong demand for its shares in coming years.
- This is a multi-year opportunity that could see investors who get in now rewarded handsomely over the next half decade.
- As we have predicted in October 2013, oil prices have dropped substantially, along with the stock prices of most major oil companies.
- Exxon's current stock price decline is consistent with previous declines associated with crude oil sell-offs, while lower capital spending and improved margins will provide some cushion.
- At this juncture, additional major declines in crude oil prices are less likely, hence providing a buying opportunity in Exxon shares.
Exxon Mobil Valuation Analysis: Slightly Overvalued
- Going by a DCF analysis, a comparable company analysis, and a historical multiple analysis, Exxon appears to be overvalued based on its fundamentals.
- Given the recent drop in oil prices, the company still trades in line with its historical multiples and a turn above its comps' mean multiple.
- This analysis is meant to be illustrative for potential and current Exxon investors, as I derive a fair value for the company between $80-$84 per share.
- Exxon Mobil is a good long-term investment in a dividend growth stock.
- Exxon Mobil has shown considerable earnings per share surprise in each one of the last three quarters, and according to its historical valuation multiples, the stock is significantly undervalued.
- Exxon Mobil is generating strong cash flows and returns value to its shareholders by stock buyback and increasing dividend payments.
- Dividend Challenger Exxon Mobil yields 2.9% at a price of $95.11 and has a reasonable five-year CAGR of 9.7%. It trades at a discount of 5% to my fair value estimate.
- Along with other energy sector companies, XOM is challenged by a weaker commodity price environment.
- The company's aggressive share buybacks and its dividend commitments are not sufficiently covered by the free cash flow it is generating, which could inhibit future dividend growth.
- Exxon Mobil's shares are down 5% since the beginning of the year.
- Falling oil prices are the main reason why Exxon Mobil has performed poorly lately.
- With higher oil prices, I expect Exxon Mobil's shares to kick into gear.
- The energy company is still undervalued, and a purchase below $100 can make a lot of sense for long-term oriented investors.
Exxon Mobil Corporation, Currently Undervalued And A Strong Buy
- Exxon Mobil Corp., formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company.
- With a relentless pursuit of efficiency via technology and operational improvement, Exxon sets itself apart from other supermajors and has delivered higher returns on capital.
- On October 31, 2014, the company announced third-quarter 2014 earnings of $1.89 per share, up from $1.79 in the prior year's third quarter.
Dividend Zombies: Exxon - YDP Analysis & Fair Value Appraisal (Part 4)
- Dividend Zombies are income equities that have survived more than 100 years with unbroken and undiminished dividend distributions. These are the 8 income machines that can't be killed.
- This part 4 of an 8-part series, evaluates XOM fair value price, technical momentum trends, entry point, and a yield boost while lowering market risk using covered option writing.
- Exxon, at the November 7th close of $96.59 is 16.63% below fair value price for income investors. A soon expected dividend raise will increase the target to $117.55.
Fri, Dec. 5, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, APC, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, COP, XOM, FST, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Fri, Dec. 5, 5:07 AM
- "Our recent visit to Oil Search's (OTCPK:OISHF) PNG assets further underlined our positive view on the company. Performance to date at the PNG LNG project has exceeded all expectations, with the focus increasingly shifting to expansion opportunities," firm says.
- "The project continues to exceed our expectations, achieving world class utilization rates (>98%) within the first 9 months. With debottlenecking studies underway, and a 6% capacity increase already achieved in the upstream, we see potential for further value and earnings accretion at the base
project in the near term."
- Oil Search's JV partner in the PNG LNG project is ExxonMobil (NYSE:XOM).
- Price target of A$10.20 vs. current A$7.68. Implied upside of 32.8%.
Thu, Dec. 4, 3:22 PM
- There's an increasing rate of reports of long lines at convenience store outlets across the U.S. as consumers rush to find sub-$2.50 gas.
- C-store chains are pricing aggressively in order to increase traffic into stores where margins tend to be higher.
- The sector has been identified by retail analysts as likely to outperform in Q4 due to the spending boost provided by lower gas prices (you could ski down the chart of retail gas prices over the last three months). Some forecast in-store spending will pop.
- Convenience store operators in the mix: Circle K (OTCPK:ANCUF), 7-11, Pantry (NASDAQ:PTRY), BP Connect (NYSE:BP), On the Run (NYSE:XOM), Speedway America (NYSE:MPC), Kwik Shop (NYSE:KR), Caseys General Stores (NASDAQ:CASY), and Qwiktrip.
- Related: Let's talk $2 gas (Nov. 29 2014), Sub-$2 per gallon spotted as pump prices fall to 4-year low (Dec. 03 2014)
Wed, Dec. 3, 11:32 AM
- The energy sector (XLE +1.5%) continues its momentum from yesterday, leading the way again as the best performing sector in early trading with crude oil rising 1.2% so far today and reports that U.S. well permits fell 40% last month.
- Top performers include Clayton Williams (CWEI +7.7%), Transocean Partners (RIGP +10.6%), Gaslog (GLOG +13.8%) and Energy XXI (EXXI +15.7%).
- Other leading energy names are showing stronger recoveries as they clear last Friday's bearish gap zone: XOM +0.2%, CVX +0.4%, COP +2.5%, OXY +2.5%, DVN +2.9%, EOG +2.5%, HES +2.2%, MUR +1.5%, NBL +2.3%, PXD +4.2%, SU +3%, CNQ +1.9%.
- Some analysts warn that the worst may not be over, however, as much of the advance is being driven by investors repurchasing ETFs they used to make short bets; investors also could opt to sell oil shares at a loss in coming weeks to reduce tax burdens.
Wed, Dec. 3, 10:15 AM
- Exxon Mobil (XOM +0.7%) can weather the downturn in oil prices even if prices sink to $40/bbl, CEO and Chairman Rex Tillerson tells CNBC.
- XOM's large projects in areas such as liquefied natural gas and deepwater drilling are decade-long investments that have been tested to perform across a broad range of prices as low as $40 to as high as $120, Tillerson says.
- The CEO says he is comfortable with XOM's North American exposure, but that lower oil prices will lead to a "sorting out" of smaller unconventional players in the U.S.
Wed, Dec. 3, 8:24 AM
- Imperial Oil (NYSEMKT:IMO) says it has restarted production at the Kearl oil sands mine in Alberta to pre-shutdown levels after it halted operations last month because of a mechanical problem.
- Exxon Mobil's (NYSE:XOM) Canadian subsidiary suspended production after detecting a vibration issue in the mine’s core ore-crushing machinery used to extract heavy oil; Kearl had averaged 92K bl/day of crude in Q3 prior to the halt.
- Kearl amounts to ~50% of IMO’s total 3.6B boe of proved reserves, and is expected to ultimately produce up to 4.6B barrels of oil over the next 40 years.
Wed, Dec. 3, 7:58 AM
- The plunge in oil prices has erased more than half of Tullow Oil’s (OTCPK:TUWLF, OTCPK:TUWOY) market value since June, and Bloomberg reports that management is now concerned the company could be vulnerable to a takeover approach by a larger oil and gas producer.
- Tullow offers “a significant operating position that would not look out of place in the portfolio of a larger company,” says Societe Generale's David Mirzai, adding that the drop in oil prices “would certainly make it a lot easier to win the investor base around than in previous years.”
- Total (NYSE:TOT), Cnooc (NYSE:CEO) and Exxon (NYSE:XOM) would be among logical bidders since they’ve expressed interest in African assets before, BMO says, adding that a buyer would not need to contend with obstacles such as a poison pill or dual-class stock structure.
Tue, Dec. 2, 12:15 PM
- Chevron (CVX +1.8%) says oil and natural gas production has begun from the Jack and St. Malo fields development project in the deepwater Gulf of Mexico, 10 years after the fields were first discovered.
- CVX expects total production from the $7.5B project - its costliest active investment in the Americas - to ramp up to 94K bbl/day of crude and 21M cf/day of gas by 2020, with 500M boe from the two fields over their 30-year lifespan.
- CVX has a 50% interest in the Jack field, with Statoil (NYSE:STO) and Maersk splitting the remaining half, and it owns 51% of St. Malo, with co-owners Petrobras (NYSE:PBR), Statoil, Exxon (NYSE:XOM) and Eni (NYSE:E).
Tue, Dec. 2, 10:33 AM
- BofA Merrill Lynch downgrades the energy sector to Marketweight following OPEC’s decision to maintain rather than cut production, now seeing $70-$75 as Brent crude's 2015 range, while warning of value traps.
- "With the collapse in crude, the sector now trades at a 20% discount to the S&P 500, where it has historically traded in-line with the market," the firm says, "but further estimate cuts are likely to come, [as] prices are falling faster than earnings are deteriorating."
- Seeing WTI possibly falling as low as $50 in the coming month, BofA warns that "volatility in oil prices translates to volatility in earnings."
- For exposure to the sector, the firm prefers big, lower beta stocks such as Exxon Mobil (XOM +0.5%).
- Citi also cautions against assuming that oil prices have found a bottom, and wants to see a more thorough confirmation of a technical base of support before proclaiming anything more than the latest trading bottom; however, Citi's Scott Gruber recommends moving aggressively on oil services if WTI crude falls into the $50s - his top picks, in order, are Baker Hughes (BHI +0.1%), Halliburton (HAL -1.3%) and Weatherford (WFT +2.7%).
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, FCG, DIG, GASL, DUG, IYE, XES, IEO, IEZ, PXE, PXI, FENY, PXJ, RYE, FXN, DDG
Mon, Dec. 1, 7:15 PM
- Oil Search (OTCPK:OISHF) has bid more than $300M to buy Talisman Energy's (NYSE:TLM) Papua New Guinea assets, WSJ reports, in a move that could accelerate an expansion of the country’s flagship gas export facility.
- A deal could help Oil Search secure enough gas to justify a new pipeline and processing unit at the $19B PNG LNG export plant operated by Exxon Mobil (NYSE:XOM), while it would help TLM meet a goal of $2B in asset sales by mid-2015.
Mon, Dec. 1, 12:21 PM
- Oil prices are rebounding, with both WTI and Brent crude up ~2%, but only a handful of energy stocks are rising.
- Exxon Mobil (XOM +1.4%) and Chevron (CVX +1.3%) are both up more than 1%, but the vast majority of energy stocks - led by Denbury Resources (DNR -8.9%), Newfield Exploration (NFX -7.6%) and Goodrich Petroleum (GDP -22.3%) - are seeing heavy selling.
- The SPDR Energy Select Sector ETF (XLE -1.2%) is lower despite gains in XOM and CVX, XLE’s two most heavily weighted stocks, as 38 of its 43 equity components trade lower; the ETF has now lost 7.5% since OPEC sent oil prices plunging by agreeing last Thursday not to cut production.
- Among XLE’s most actively traded components, Kinder Morgan (KMI -3.3%), Halliburton (HAL -3.4%), Transocean (RIG -6.1%) and Schlumberger (SLB -2.1%) are sharply lower.
- Other big decliners include BBEP -17.8%, SD -12.1%, SN -13%, CWEI -8.8%, CPE -14.6%, EXXI -18.9%, LRE -22.8%, REI -16.9%, SSE -15.3%.
- Other ETFs: ERX, VDE, OIH, XOP, ERY, DIG, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Fri, Nov. 28, 7:25 AM
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobil (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
Tue, Nov. 25, 12:01 PM
- Nuverra Environmental Solutions (NES +11.3%) agrees to provide water-related pipeline services in North Dakota for Exxon Mobil (NYSE:XOM) subsidiary XTO Energy.
- NES will build the 150-mile McKenzie County pipeline network to provide produced water gathering and disposal services and fresh water delivery as part of a long-term, fee-based gathering agreement.
- The network is projected to cost $125M-$150M, with completion expected by Q4 2015.
Mon, Nov. 24, 10:45 AM
- Exxon Mobil (XOM -0.8%) and Chevron (CVX -0.4%) are lower as Raymond James downgrades both companies given their limited leverage to potential improving oil prices, while analyst Pavel Molchanov feels oil is within weeks of bottoming regardless of the OPEC decision.
- In cutting shares to Market Perform from Outperform, the firm says XOM's "ultra defensive" characteristics, including a large chemicals and refining businesses, have insulated the company from the worst of the falling oil prices, but it still expects the stock to be a middling performer.
- CVX, which is reduced to Outperform from Strong Buy, is approaching the peak of its spending while production growth should accelerate in the next two years, the firm says.
- Also, Molchanov upgrades Occidental Petroleum (OXY +0.8%) to Strong Buy from Outperform and Hess (HES +0.1%) to Outperform from Market Perform.
Fri, Nov. 21, 5:55 PM
- Four years after the Deepwater Horizon disaster, giant new oil projects are returning to the Gulf of Mexico - bigger and more expensive than ever - even as U.S. oil prices are below $80/bbl at a four-year low.
- New projects alone have the combined capacity to pump ~900K bbl/day: Hess (NYSE:HES) said Monday it had started pumping crude from its deepwater Tubular Bells installation, Exxon (NYSE:XOM) and Anadarko (NYSE:APC) plan to start up two more major Gulf projects in coming months, and Hess, Chevron (NYSE:CVX) and other partners recently OK'd a $6B Gulf development.
- Even BP is returning in a big way, with two Gulf projects and plans to spend $4B/year in the Gulf for the next decade, as it works on technology to drill at greater depths.
- All this is happening even as costs are jumping, partly because companies are drilling farther from shore and in deeper waters; deepwater wells are up to 25% more expensive today than in 2010, and drilling the average deepwater Gulf well takes 13% longer than it did before the 2010 spill.
- Shell’s (RDS.A, RDS.B) 100K bbl/day Olympus, which came online ahead of schedule and under budget, began tapping oil and gas in the Gulf in February; it is also working on a new Gulf project that will tap an oil field under 9,500 feet of water, 3x deeper than Olympus.
Fri, Nov. 21, 8:49 AM
- Ivory Coast's government says it is finalizing production sharing agreements with Exxon Mobil (NYSE:XOM) for two ultra-deepwater blocks in the Gulf of Guinea, and expects to finish discussions by year's end.
- The west African country is seeking investors for seven new ultra-deepwater blocks, inviting XOM and other oil majors to a promotional event in Texas last month.
XOM vs. ETF Alternatives
Exxon Mobil Corporation is engaged in energy, involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products.
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