CrossProfit_

Amaranth: Tip of the Iceberg

"But isn’t this is the same company that was earning $3 a share in 2003? Yes. What changed? Did they increase market share? No. Did they increase efficiency? No. Cut costs? Heavens no!"

Everything in this statement is factually incorrect.

XOM has increased market share outside U.S., have increased efficiency at U.S. refineries by 4.5% on average (which is better than anyone else in the business), and have cut crude production costs. Unlike the rest of the pack, XOM did not squander this up cycle. Instead they were wise enough to prepare themselves for the leaner years ahead, meaning they are NOT the same company as they were in 2003. The rest made the same mistakes they have made throughout past up cycles, such as expensive acquisitions. Notice how XOM bought nothing of significance during this time frame!

We are not the only analysts to have this information. Notice how XOM has broken away from the pack over the past two months. This is for fundamental reasons, NOT wishful thinking.

We still think that oil will remain high for the foreseeable future. As in the past we clearly stated that high means anything above $45. As previously disseminated we are heading for a new trading range of $51 to $65. XOM has been factoring in the low end of 51 for months now.

Watch how XOM increases earnings in 2007 over 2006 and we not finished with 2006 yet. We are not kidding. 2007 will show a 6% increase YOY. This is when the full impact of facility upgrading kicks in with cheaper heavy crude as the base. As the spread between heavy and sweet continues to grow, for XOM this is money in the bank.

Phil- short something else.

Disclosure: This personal comment by a CrossProfit analyst reflects the opinion of CrossProfit.com. Unless explicitly stated otherwise there are no conflict of interests.
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