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Comparing 4 Energy Majors: Chevron, Exxon, BP And Shell

May 06, 2020 6:45 AM ETExxon Mobil Corporation (XOM), CVXBP, SHEL73 Comments
Jeremy Blum profile picture
Jeremy Blum


  • With oil and gas prices at historic lows, these four majors are reviewed for dividend coverage, leverage, liquidity, profitability, cash flow and valuation.
  • The four are ranked for investment now by dividend investors, long-term investors and short-term investors.
  • Oil and gas prices will likely recover within two years.  They can move much faster up or down than other mining commodities.
  • If you believe the remedy for low prices is low prices, an investment here is worth a look.

In this article, I compare the four major integrated energy companies, Chevron (NYSE:CVX), Exxon (NYSE:XOM), BP (BP) and Royal Dutch Shell (RDS.A) (RDS.B), as an investment. This is not intended to be a comprehensive analysis. It should be considered part of a due diligence process or an idea generator.

Market overview

As I write this article, crude oil and natural gas prices are trading at close to historically low prices. Both are well below the break-even rate for most energy companies when maintenance capital expenses are factored in. Consensus estimates are it takes about $50 crude oil prices to break-even for the average E&P company. Crude is currently trading at $24. There is a glut of crude oil resulting in almost no storage facilities still available. Unconventional storage such as ships and pipelines are being used temporarily.

It is likely we will see a shakeout in the industry with many weaker players going under. We need this; there are too many of them adding too much supply. A shakeout eventually benefits the larger and stronger companies for several reasons. It creates numerous assets available for purchase cheaply. It will significantly reduce production bringing demand and supply back into balance. It may even create a shortage of supply once the pandemic recedes and demand increases.

There are other potential tailwinds too. Crude oil and natural gas prices generally correct more quickly than other commodities. It usually takes less time and money to drill or shut in a well than create or close a mine. Existing wells generally deplete faster than a mine. There is a longer lead time to develop a mine.

Another major tailwind for prices is the major capital expense cuts and production cuts which have been announced. The four majors reviewed here have recently announced capital expense cuts of

This article was written by

Jeremy Blum profile picture
Tipranks.com shows my articles have averaged over 35% over a one year period.  I was the Credit Manager for a mid-sized publicly traded bank and retired early in 2013. Despite never working in the industry, I took and passed the CFA Level 1 exam.  I usually only write about stocks that are my best ideas and I have a position in.  I traditionally have invested in and written about small and micro cap deep value stocks. As an investor you can get an edge in researching and talking to management of small and micro cap companies that have little or no analyst coverage. About 50-75% of my portfolio are deep value stocks, primarily microcaps. That is historically where I have had the best returns.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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