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Top 5 Oil Supermajors: Third-Quarter 2018 Analysis

Dec. 06, 2018 3:45 PM ETBP, CVX, SHEL, TTE, XOM48 Comments


  • An integrated oil company is an oil and gas company involved in the entire oil process cycle, from exploration to distribution.
  • Do the oil supermajors continue to make sense for conventional investors? My answer is yes.
  • I recommend investing long term in this sector, and above all other special consideration, you must adopt an active trading/investing strategy.

Source: Getty Image

Investment Strategy

An integrated oil company is an oil and gas company involved in the entire oil process cycle, from exploration to distribution. Most investors classify these public companies under the "big oil" group. I will scrutinize the five most prominent ones, which are:

  1. BP Plc (BP),
  2. Chevron Corp. (CVX),
  3. Royal Dutch Shell (RDS.A)(RDS.B),
  4. TOTAL S.A. (TOT),
  5. And Exxon Mobil (XOM).

We are entering the last month of 2018 now, and all oil supermajors in the S&P 500 index have reported their third-quarter 2018 numbers. The earnings figure has been exceptionally good with the Energy sector seeing year-over-year robust earnings growth and higher revenues. According to Factset on October 12, 2018:

The Energy sector is expected to report the highest (year-over-year) earnings growth of all eleven sectors at 93.6%. Higher oil prices are helping to drive the unusually high growth rate for the sector, as the average price of oil in Q3 2018 ($69.43) was 44% higher than the average price of oil in Q3 2017 ($48.20).

However, significant oil price weakness which began early October has been excruciatingly painful for the whole oil industry which entered a severe bearish cycle aggravated by increased volatility. The result is that it created uncertainty, and it is one thing that the market doesn't like is precisely uncertainty. Then, it is legitimate to ask ourselves the question below.

Do the oil supermajors continue to make sense for conventional investors?

It is the same question that consistently comes back to torment us all, especially when oil prices are weakening and turn extremely volatile with no real robust future outlook.

The answer is invariably the same, and it is, yes, of course. Investing in the oil and gas business is paramount for the long-term stability of your portfolio. In the oil industry, the

This article was written by

Fun Trading profile picture

Fun Trading is an independent investor and retired engineer. He manages his own portfolio and writes about investing in all facets of gold and oil & gas.

He runs the investing group The Gold And Oil Corner where he shares a stock tracker with over 50 companies covered, in-depth technical analysis for both short and long term holdings, and a live portfolio with a range of metrics. Learn more.

Analyst’s Disclosure: I am/we are long RDS.B, TOT, BP, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (48)

Fun Trading profile picture
Thank you Zoomanji,

For France

"As a general rule, dividends paid to non-residents are subject to a 12.8% withholding tax for individuals or 30% withholding tax for companies. The Finance Act for 2018 provides that the withholding tax applicable to companies on dividend payments will be aligned to the French corporate tax rate as of January 1, 2020 (see Tax Rates). Until January 1, 2020, the applicable tax rate remains 30%."

Best regards,
For international investors, TOTAL S.A. has been outperforming the sector and offers an excellent dividend with now a reduced withholding tax rate of 12.8%,

Hi Author, thank you for the write-up. I am an owner of some French stocks with dividend yield. Does this reduced witholding tax rate apply to international investor in 2019? I read somewhere the French withholding tax has been reduced but I cant find anything concrete.

Thanks, I just saw the question has been answered above.
enge2103 profile picture

For France the withholdingtax drops to 12.8 % to my best of knowledge next year?
Fun Trading profile picture
Enge and Kampmann,

Yes, the French withholding is 12.8% and I indicated it in my article.

Best regards,
As far as I understand, Dividend withholding rates depend on your residence and whether you recover difference between statutory rates and tax treaty rates (if there is a tax treaty).
I live outside EU and get following withholding: 0% BP, 0% RDS-B, 10% RDS-A, 30% XOM, CVX and TOT. The US has no tax treaty so 30% is lost for XOM and CVX.
Normally you can recover most of French withholding but they don't make it easy, last time it took me 2 years and was a huge hassle. If you have any inside I would love to hear it!
enge2103 profile picture
Long TOTAL, ENI and TECHNIP-FMC, thanks for the article, agree fully.
Fun Trading profile picture
Thank you enge.
VLO and MPC are close to 52 week lows, and Morningstar is pounding the table on MPC. However, if the OPEC oil production cuts increase the price of oil, doesn't that increase the costs of MCP and VLO? Seems like I'm better off focusing on the oil supermajors like TOT, BP, etc...rather than pure refiners....though I do like a good bargain....
Fun Trading profile picture

I like VLO and own the stock long-term. It is a strong company in this sector and will fare well with patience. We have been adding recently... Another good long-term potential is SLB in the services. I will probably publish my thoughts about both this week, starting with VLO.

Best regards,
@Fun Trading -- Great, can't wait for the article! I suppose also that owning a refiner is good for diversification purposes...some of my stocks are up while others are down, but overall diversification keeps me in the game.
Fun Trading profile picture

It is the name of the game. Diversification! Especially in a cyclical type of industry. Choosing some contrarian is important such as dollar-against-gold type.
Even in the oil sector, you have opposite currents that can give you some good leverage long-term.

Best regards,
What does Shell mean by LNG Canada? Is it the stock ticker LNG or something else. thanks
Fun Trading profile picture

LNG Canada is liquid Natural Gas in Canada. Nothing to do with the ticker. If you want to know more, just click the blue link in my article or here:


Best regards,
FT: Current sell off is an "opportunity" as you stated in another article. I agree. I think OPEC members (GCC) will cut deeper behind the scenes to achieve $75 Brent soon enough. We have seen his movie before LOL:) - added to RDC, NE, MRO and ICD today.
Good work FT.
Fun Trading profile picture
Mr Driller,

Thank you...
Cuip99 profile picture
Long in XOM and BP. But personally I am in oil top to bottom, owning interests in gas and oil wells, MLPs, Refiners, etc. So am I a major, well no, I am a teeny weeny. But I enjoy it and have so far made some money at it. I do believe oil is going to go up, as the big producers are greedy and want more money for their commodity. Thus oil giants will do well in the coming year. Not so sure about the rest of the market.
Fun Trading profile picture

Great comment... I share your thoughts about the market.
Really liked the article, the comparison of the major players is worthy content!
Damn Good Article...... Thank You, and I do own a boat load of both Shell Issues, with holding will cease in 2019 for the A series, BP is another large position, am looking seriously at VLO, CVX, TOT, XOM...in that order....
Fun Trading profile picture
Thank you Srdilisc
Great article. My biggest holding is RDS, followed by XOM, Suncor, CVX, DVN, BP, and PSX.
I'd like to have some SLB in my collection.
Fun Trading profile picture

What a stock collector you are...
FT, those were just my oils. Did not list my 30 gold and silver miners, and all the blue chips like JNJ, UNP, MMM, BTI, IMBBY, PFE, GSK, AGN, WRI, VZ, etc. Started my collection in 1965 when I was in high school. Paid less than $2 a share for my XOM and RDS. Isn't capitalism wonderful!
Fun Trading profile picture

Impressive, thank you for sharing.
I'm following the oil price for buy times but always liked Royal Dutch Shell as they have the best logo from when they were a shell trading company. They are a member of the hydrogen Council also which shows they are looking way down towards the future. Germany already has hydrogen pumps all over which is great as it also mixes with natural gas for home heating and storing wind and solar. Hydrogen could supply over 18% of global energy by 2030 if folks wanted and I think they will later. Tesla is a joke and Americans don't want a limited range auto that you have to wait too charge up when a fuel cell truck or auto EV is zero pollution with no range limits or wait time. That is the real deal not Elon Musk. Any oil major is good but you but them when oil prices bottom and we will be using oil and gas for a long time yet.
Fun Trading profile picture

Good comment... Yes, Shell is active in alternatives, so is Total S.A.
Fun,I own ADR in BP, US citizen... wasn't aware of a dividend withholding?
Fun Trading profile picture
If you own ADR US you pay only a fee that could be $0.005 per ADR share, I believe.

"Investing in foreign stocks via American Depository Receipts (ADRs) involves a few disadvantages. For instance, one has to pay dividend withholding taxes to foreign governments on dividends paid by the foreign company with some exceptions. Countries like the UK, Singapore, etc. do not deduct this tax for US investors and others such as Canada waive the tax if the security is held in a retirement account. The tax rate can be lower than the regular rate if there is a special tax treaty between the US and the country. In addition to this tax, another unique expense with owning a foreign stock is ADR fees (also called as ADR pass-thru fees or ADR service fee)."

Hope it will help...

Best regards,
@newburgh I am NOT aware of any 15% withholding in the BP US traded ADR either...
Fun Trading profile picture
ADR in US is paying a fee-only $0.005 per share...
Is it a right time to pull the trigger for VLO ? I have been waiting patiently to buy .
Fun Trading profile picture
It is quite low but could eventually go to $75 (I recommend buying at this level and accumulate if it goes down). I think it will be a lot of volatility in the oil market and we may see more pain ahead.

Best regards,
Henry Miles profile picture
Fun Trading

Excellent; thank you for this. In my piece of November 28th, I recommended also screening against commitment to both natural gas and renewable energy. seekingalpha.com/... We're aligned on BP, RDS.B, and TOT on which I'm long. Thanks again, good work.

Fun Trading profile picture
Thank you Henry,

Best regards,
Steady Income profile picture
Great article! I own RDS.B, CVX and HP. RDS.B is three percent of the investment in my IRA; CVX and HP are each two percent. That's all I want to own in this sector, otherwise I'd add XOM at these prices.
Shelby500 profile picture
Bet on the entire race, invest in all five super majors!
Fun Trading profile picture

Good strategy but you need a good cash position to do that and you may lose on other assets class? Remember, diversity.

Best regards,
A helpful summary comparison.

Have held RDS for almost 10 years. Used to own XOM (through the Mobil/Exxon merger). Not inclined to add another super-major to the portfolio, but am definitely hanging on to Shell long-term.

Retired income/dividend-growth investor
Fun Trading profile picture
You are welcome, If you keep RDS, it is totally fine. Do not forget to use the market and add a few trades as I recommended.

Best regards,
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