longoil

Why Exxon Should Significantly Increase its Dividend

Check out the news headlines this morning:

"Cnooc challenging Exxon over Ghana oil""

www.marketwatch.com/st...

This is exactly why it is good that Exxon is hoarding cash. The Chinese have trillions in USD. Only totally solvent companies with cash surpluses like XOM or CVX can challenge the Chinese majors like PTR and CNOOC and guarnatee the US access to what-ever little oil is left in the world.

O Canada! (Part III): Black Gold, Natural Gas and Growing Dividends Too

Excellent article Joseph !!!!

I would recommend the following additional Canadian petrocompanies:

1) Encana, major gas producer in Canada & USA, dividend =2.7%
2) Suncor, 40 yrs oil sands reserves, low debt, dividend = 1.1%

Income Trusts
1) Canadian Oil Sands, 40 yrs oil sands reserves, low debt, dividend = 3%
2) Enerplus, 45% gas & 55% oil, dividend =9%
3) Penn West , 30% gas & 70%oil ,dividend =10.5%

Why Exxon Should Significantly Increase its Dividend

long_on_oil

I have XOM and CVX as my main US holdings, but I agree having several foreign oil companies in your portfolio as a hedge against a falling USD and future windfall taxes.

In Canada, COSWF and ERF are great income picks that pay good dividends as well as ECA for growth as natural gas picks up.

In Europe I think BP, TOT, RDS and STO are all good bets.

PTR (China) and PBR (Brazil) are probably safe bets and have great potential.

The only region I would not touch is Russia. You probably know all too well about the forced renegotiations on BP with its TNK venture, I would avoid Gazprom and Lukoil like the plague. I can see Putin and gang screw foreign investors again once oil and gas prices pick up.

Why Exxon Should Significantly Increase its Dividend

MJE_PDX:

Buying the Kosmos stake in Ghana at $4 billion is chump change for Exxon. Exxon earns $40 billion profit per year and the Ghana stake would take them only 5 weeks to pay off in full.

I can see the "seven sisters" reunited as well in the near future. Already Exxon has swallowed up Mobil and Chevron has had Texaco and Gulf under their banner for a while. Exxon + Chevron is a definitely possibility. The non-US seven sister members like BP, Shell and the eighth sister Total (former CFP) might form a European super oil company. A XOM/CVX plus BP/RDS/TOT merger might be a bit trickier because of all the potential anti-trust issues. But then again American Lucent (former ATT) merged with French company Alcatel.

Why Exxon Should Significantly Increase its Dividend

Fitz,

I agree the CEO at Exxon is overpaid, but Exxonmobil's finances are completely in order. Now, compare this to the CEO salaries in the following banking and investment firms in 2008.

1) Lloyd Blankfein, Goldman Sachs Group Inc., $42.9 million
2) Kenneth Chenault, American Express Co., $42.9 million
3) Vikram Pandit, Citigroup Inc., $38.2 million
4) Jamie Dimon, JPMorgan Chase & Co., $35.7 million

As a shareholder of Exxon, I say I got my money's worth. If I were a shareholder of bank or investment firm I would say I was cheated.

Why Exxon Should Significantly Increase its Dividend

long_on_oil,

I have to disagree with you that investments in oil companies are all going to zero for several reasons:

1) All major oil companies are continuously buying up their competitors or new reserves (Exxon in Ghana, Shell in Australia, and everyone is a player in the Canadian oil sands), but I agree this is a losing game that ends in 10 to 20 yrs.

2) All major oil companies are buying back their shares. They are shrinking their share base. Exxon spends half its money (30 billion / yr) on share buybacks. At the current rate, Exxon will be a private company before 2020. Every buyback campaign cranks up the share value.

3) I am a believer that significant advances in alternative energy will come from big oil companies. They all know peak oil is real. CEO's from Total, BP, Chevron, etc. have all publicly admitted this. Their current spending on alternative technology is small at the moment, but they have they have money to scale up production when the time comes. You have Exxon investing algae, Chevron in biobutanol, Shell in biofuels &hydrogen, Total in biomass, GTL & hydrogen and BP in wind, solar & biofuels. Unlike the internet revolution where quantum leaps came from two guys working in their garage, alternative energy technology needs big money to advance.

Why Exxon Should Significantly Increase its Dividend

Fitz,

I would like to see Exxon increase its dividend as well. But I would prefer Exxon keeps its immaculate balance sheet over a higher dividend payment. Exxon has a higher credit rating than the US government at the moment. I think the best investments in big oil are Exxon, Chevron, BP, Shell and Total.

I do not like Chesapeake or ConocoPhilips that are over extended in debt. I am quite surprised to see COP and CHK rising every day while XOM and CVX stay dormant.

How Much Natural Gas Remains in the USA?

I have seen very optimistic numbers from natural gas expert, Robert Hefner III.

1) Remaining proven global conventional NG reserves are currently 6,400 TcF

2) The potential global reserves of non-associated NG(unconventional NG, shale gas, tight gas, chalk gas, etc.) are in the 30,0000 to 40,000 TcF range.

3) He quotes USGS methyl hydrates reserve numbers at 100,000 to 300 million TcF worldwide.

Climate Change: How to Invest for the Possibility

Joseph,

I would NOT take Al Gore opinions very seriously. His record speaks for itself. I have to question Al Gore's real motives.

His global warming crusade is making a lot of green for him. He gets a minimum of $100,000 for every 90 minute talk his gives on global warming. No wonder he did not want to run again for president in 2004 nor in 2008 and get only a measly $200,000 / year salary.

thesmokinggun.com/...

You would think someone worth $100 million would do these talks for free, especially if he really believes in climate change.

A report by the Nashville Electric Service that showed Gore used an average 16,000 kilowatt hours a month for an average monthly bill of $1,206 in 2006. The typical Nashville home uses about 1,300 kilowatt hours. So much for leading by example !

Furthermore, look at Gore’s accomplishments with Clinton from 1993-2001. The CAFE standard was in good hands with Ford, Carter, Reagan and Bush 41. It rose from 15 to 27 mpg during 1975-1992. Clinton and Gore (Mr. "Earth in the Balance") were pandering for UAW votes in the 1990's and they expanded the light truck exemption to include Hummers, SUV, Jeep and Minivans and that essentially killed CAFE and it is now been flat at 27 mpg.

The real motive for Gore’s climate change crusade is to make more green for himself. He stands to gain the most from cap-n-trade and may become the first carbon billionaire, if the legislation goes through.

network.nationalpost.c...

H.R. 1835: Legislation for Natural Gas Transportation

Fitzman,

That is great news, finally less talk and more action in Washington on the NGV front.

Another good investment would of course be Exxon-Mobil who is pioneering many new technologies in tight gas and shale gas extraction. Here is a blurb from the XOM website.

"ExxonMobil technology has opened up so-called “unconventional” energy resources such as tight gas, heavy oil and oil sands — which previously were considered inaccessible or too costly to recover. For example, in Colorado’s Piceance Basin, ExxonMobil’s Multi-Zone Stimulation Technology (MZST) has opened up tight gas resources by allowing operators to create fractures in reservoir rock at a more rapid rate than conventional technology so gas can flow more easily. Using MZST and our Fast Drill Process, ExxonMobil is increasing recovery and production rates at Piceance while reducing development costs and our environmental footprint. Breakthroughs such as these have contributed to a recent increase in U.S. natural gas production"

Why Is Oil Trading at $53 When Supply and Demand Is So Bearish?

I made mistake in my numbers, change the price of NG to $3.00 /MMBTU then the following story makes sense.

Why Is Oil Trading at $53 When Supply and Demand Is So Bearish?

Long_on_oil,

I wondering also why anyone would operate a business at a loss. A while back, one of the posters gave a very good explanation for this in the oil and gas industry.

For example:
1) Let's say the price of natural gas is $5.00 /MMBTU
2) Fixed costs (e.g. long term debt for infrastructure ) are $3.00 /MMBTU
3) Variable costs (e.g. salaries) are $1.00 / MMBTU

On the surface, you are losing $1.00 / MMBTU. But cutting back on production is worse. You still have fixed costs that you have to pay regardless and your loss would be $3.00 / MMBTU if you did not sell anything. Furthermore, losses can be carried forward against taxes on future profits.

Why Is Oil Trading at $53 When Supply and Demand Is So Bearish?

$145 oil will look like a bargain by the middle of the next decade.
Oil demand is ramping slowly around the world.

In India, the Tata car (priced at $2050) was officially launched today. The target market in India for this car is the middle class (currently numbering at 50 million people). This number is expecting to hit 583 million by 2025 according to McKinsey & Company. That is equivalent to adding two more United States size consumer groups in competition for the dwindling world's oil supply.

Next to India, China is taking advantage of the drop in resource prices and buying up everything from copper to oil. They have been signing long term deals with Russia, Brazil, Venezuela, Iran, etc. The loading up their SPR's feverishly with cheap oil. The Chinese are thinking long term.

On the homefront, the USA has put energy independence on the back burner and instead is investing trillions in bailouts. Obama has allocated a measly 43 billion on alternative energy and related infrastructure. The opportunity to make the USA the world leader (and exporter) in alternative energy technology is being squandered to help Obama's Wall street and UAW buddies instead.

Your Oil Stocks Aren't Coming Back

Comparing oil services stocks and internet stocks is like comparing apples and oranges. The world can live without eBay or Amazon, but cannot live without oil and gas.

Conventional oil production has peaked. This is why major oil companies are investing heavily in non-conventional projects like the oil sands, deep sea drilling and tight gas extraction. The current economic malaise has hidden the fact that peak oil is happening. The services companies RIG, DO, and NOV as well as producers CHK and COP are excellent long term plays when the economy (and oil demand) recovers.

Alternative energy sources (solar, wind, hydro) currently makes up less than 5% of the world's energy mix. It will take at least 50 years to get off of oil and gas. Oil and gas is king till the middle of this century.

8 Possible Targets for Exxon's Cash

I agree with most of the potential buyout targets, except Suncor. Exxon already has a 25% stake in Syncrude (the other major oil sands producer) through its ownership of the subsidiary Imperial Oil. I don't think the Canadian government would allow this scenario.

Exxon will most likely continue its current path of artificially increasing share holder value via share buy backs. At the current rate, Exxon will be a private company with no shares listed by 2020. But its reserves will be mostly depleted by then if it doesn't develop or acquire new ones. The economic slump has setup many excellent buying opportunities as the author has stated.