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  • The Potential End Of An Era For Exxon, But What Does The Smart Money Think? [View article]
    """End Of An Era"""

    The headline is overblown hyperbole (dictionary definition of hyperbole: exaggerated statements or claims not meant to be taken literally).

    XOM's debt is up and operating cash flow is down, so it is no surprise that a credit rating agency might put XOM's credit rating in the 'outlook negative' category. With the current oil supply/demand and price outlook there is no guarantee that XOM's operating cash flow will be quickly restored. But putting XOM on 'outlook negative' does not necessarily mean a downgrade to AA is coming. Even if XOM's credit rating were lowered, there would be absolutely no impact on the costs of XOM's current fixed rate debt. And the impact on XOM's EPS in coming quarters would be virtually nil.

    Many of the comments indicate some confusion between S&P's credit rating for XOM and its stock rating. It happens that S&P currently rates XOM stock a 'Buy' (4 stars out of 5) with a target price of $90.

    IMO, this article is much ado about nothing!
    Oct 6, 2015. 08:19 PM | 3 Likes Like |Link to Comment
  • BP's Eventual Bankruptcy Is Certain [View article]
    As I noted in my comments above, the article, including the headline "BP's Eventual Bankruptcy Is Certain", was a part of the hysteria at the time. The article was totally wrong. I bought during the panic and made a gain when I sold. Thank you, James, for helping to create the opportunity.
    Oct 6, 2015. 10:55 AM | 1 Like Like |Link to Comment
  • Exxon, Chevron outlooks cut to Negative by S&P [View news story]
    In this report, XOM is not rating the stock, but the bonds, which they are holding at AAA.

    The S&P stock report rates XOM at Buy (4 stars out of 5); the S&P 12-month target price is $90, vs the consensus mean of $81.
    Oct 5, 2015. 02:43 PM | 2 Likes Like |Link to Comment
  • Big Oil And The Art Of Bottom Fishing [View article]
    ""I don't recognize much chance of a Shell-BP-Total consortium.""

    Fred, I agree with you on this one. Nationalistic feelings, i.e., British, French, Dutch, are more likely to prevail than "Euro-Centric". It is much more likely that the majors will pick up smaller oil and gas producers than merge with each other. I give very little chance to suggestions of mergers among the existing majors.
    Oct 2, 2015. 11:47 PM | 2 Likes Like |Link to Comment
  • Dear Mr. Market, I Am Patiently Holding Shares In Lexington Realty [View article]
    Other than in 1 or 2 instances, it is unrealistic to expect REITs to engage in stock buybacks. After meeting the dividend payout requirement, REITs have a limited amount of discretionary funds available, and if a particular REIT does use those for buybacks, they are, in effect, saying "forget about growth". No good for the stock price!
    Sep 30, 2015. 09:19 AM | 1 Like Like |Link to Comment
  • Bloomberg: BP has 12.6B reasons it isn't worried about a hostile takeover [View news story]
    """ It makes more sense to sell off the US assets."""

    Why does this make more sense? The US assets are the real crown jewel. BP spent years building up its US position, in the process acquiring Sohio, Arco, and Amoco. Why would they suddenly turn around and sell everything? Besides, it would make BP a smaller company in a segment of the energy business that relies on bigness to pursue the best investment opportunities.

    I've said it before and I'll say it again. A takeover of BP by Exxon or whoever won't happen, and all the talk of it is nonsense.
    Sep 30, 2015. 09:11 AM | 1 Like Like |Link to Comment
  • Bloomberg: BP has 12.6B reasons it isn't worried about a hostile takeover [View news story]
    ""Besides you really think the government wouldn't play nicely with Chevron and Exxon?""

    Which government? The US? Why on earth do you think the US government would accommodate Chevron or Exxon in any way? And why on earth would Chevron or Exxon pay a 70% premium on the current price (i.e., $50 per share, which is your estimate of "fair" value)? Remember, Exxon is still smarting from having paid too much for XTO.

    Which government? The UK? The idea that the UK would look favorably on a takeover of BP by a US based company would be a poor joke!
    Sep 28, 2015. 10:29 PM | 2 Likes Like |Link to Comment
  • Dear Mr. Market, I Am Patiently Holding Shares In Lexington Realty [View article]
    Brad, excellent article.

    Jeff, I like your reasoning. I think the low-yield REIT's are risky in this environment.

    Long LXP.
    Sep 28, 2015. 03:14 PM | Likes Like |Link to Comment
  • Exxon said to scrap plans for temporary fix to damaged Torrance refinery [View news story]
    ""California refined gasoline comes from many sources . . ""

    Larry, I don't know where you get your info, but I believe you are wrong.

    EIA data for PADD 5 in June show that only about 1% of total gasoline supplied to the market was from imports. (PADD 5 is comprised of 5 states west of the Rockies, the dominant state being CA, and the others being WA, OR, NV, and AZ.) Some gasoline is probably shipped from refineries in Washington state that utilize some crude from Alaska and from Canada. However, as the link below shows, in June PADD 5 imported just 495 thousand barrels of gasoline, out of a total 48,678 thousand barrels supplied to the market.

    The reasons are quite simple. There are no major trans-mountain pipelines from other districts. Plus, why should refineries outside the area go to the trouble of making limited supplies of the special grades required for CA -- and then incur the costs of shipping the gasoline there in small tankers?
    Sep 25, 2015. 12:25 AM | Likes Like |Link to Comment
  • Sasol bets on U.S. shale gas with $9B Louisiana plant [View news story]
    Sasol won't do GTL in Louisiana unless the oil price rises substantially from current levels, perhaps to $80 or higher. Depends also on the ratio of natural gas price to oil price -- they will need to lock down a long term supply of gas to get financing.

    Even though the diesel fuel produced is virtually sulfur-free, there will be a lot of opposition from environmentalists, who oppose almost any large fossil fuel based project these days, even on the most irrational grounds. For a preview, see how environmentalists have delayed, and perhaps stopped for good, Keystone XL.
    Sep 24, 2015. 05:32 PM | Likes Like |Link to Comment
  • Sasol bets on U.S. shale gas with $9B Louisiana plant [View news story]
    To make polyethylene. From google:

    ""Over 60 million tonnes of poly(ethene), often known as polyethylene and polythene, is manufactured each year making it the world's most important plastic. Its uses include film, packaging and containers, from bottles to buckets.""

    Almost everything in your grocery store that comes in a plastic container uses polyethylene (stamped #1 in the triangle).
    Sep 24, 2015. 01:49 PM | 1 Like Like |Link to Comment
  • Exxon said to scrap plans for temporary fix to damaged Torrance refinery [View news story]
    At current crack spread prices, California should be highly profitable, offsetting profit declines in the upstream sector. Any decision to move out would be made on emotional, rather than rational, demands.
    Sep 23, 2015. 01:31 PM | 1 Like Like |Link to Comment
  • There's Always A Bull Market Somewhere: REITs Soar As Markets Tumble [View article]
    By the end of the day, REITs were not exactly soaring, unless one was looking at a limited sampling, such as your list of 6. Of the 28 REITs on my watchlist, 15 were up, 1 was unchanged, and 13 were down. The average gainer rose 1.2%. The average loser was down 1.8%. The loser list contains 5 hotel REITs (CLDT, INN, HPT, AHT, LHO) that were down from 2.5% to 6.7%.
    Sep 19, 2015. 02:59 PM | Likes Like |Link to Comment
  • Citigroup sees FICC revenue off 5% in Q3 [View news story]
    The presentation slides show that Citi has made good progress in the past 3 years and has strong momentum going through mid 2015. Under some criteria, Citi compares favorably with WFC. At today's close of $52.59, Citi is a bargain, selling at a 11% discount to Tangible Book ($59.18).

    Analyst's 12-month target of $65 is quite likely to be made, IMO. Long C.
    Sep 16, 2015. 11:40 PM | Likes Like |Link to Comment
  • Exxon Mobil, Guyana And Keeping Your Dividend Safe [View article]
    """The author stated in the article that XOM's share was 45%. He also stated that the production deal between Guyana and XOM has not been worked out, but XOM could get favorable terms."""


    @Larry Smith

    1. Yes, John Rhodes did state in the 5th paragraph that XOM's share was 45%. But in the very first sentence of the summary, he compares the gross value of the field with XOM's market cap. This is misleading, IMO.

    2. John Rhodes also stated, "the key point is that XOM, and other owners, will be able to pretty easily dictate terms and get highly favorable treatment from the government." This merely represents the opinion of the author, and is not the same as saying "the production deal between Guyana and XOM has not been worked out."

    There is a degree of naivete in these statements as to how the international oil business is carried out in these times. First, you can be very sure that XOM would not spend a dime, never mind millions, drilling a deep well offshore Guyana without a contract that spells out the production deal exactly -- that is, who pays what, what share the Guyana government gets, how the profits will be taxed, etc.

    Second, after making a significant oil discovery, it is Guyana, not Exxon that would be in the driver's seat in the event that there were to be a renegotiation of the deal. It is before oil is discovered that the country (in this case, Guyana) has to make the terms reasonably attractive in order to entice major oil companies to take the risk and spend the exploration $$$$. But after the oil is discovered, most of the risk is gone. If Exxon did not have a contract that would stand up in an international court, Guyana could simply chase them away and bring in another operator -- from the US, Europe, Russia, or China -- on terms that would be far more favorable to Guyana.

    3. The gross value of the field may be $40 billion. The gross value to Exxon is 45% of that, or $18 billion. But the real, net value to Exxon is a lot less than $18 billion. To get the real, net value, one has to discount the net cash flow from future production, using 10% p.a. discount factors. The cash flow stream to be discounted is given by:

    Net Cash Flow = Gross Revenue minus Future Development Costs minus Operating Expense minus Income Taxes.

    The net present value to Exxon will be a lot less than $18 billion.

    ""You added nothing that most readers didn't already know.""

    I think I added a lot that you don't appear to know.
    Sep 16, 2015. 10:47 PM | 1 Like Like |Link to Comment