Tuesday, November 4, 2014

ExxonMobil (XOM) 2014 Review

Exxon Mobil is the largest publicly traded oil company.  The company produces approximately 2.2 million barrels of oil and 11.8 BCF of natural gas daily, has reserves of over 25.2 billion barrels of oil equivalents and manages a best in class upstream operation including refining and chemical operations.  XOM has grown profits at a pace in excess of 14% over the last 10 years and earned a return on equity of between 17-25%.  While the pace of Exxon’s dividend growth has not kept pace with profits (9% over the past 10 years), it is expected rise.  The financial performance of XOM should be solid over the coming years as a result of:

(1) its reserves are diversified geographically as well as by product [conventional oil and gas, heavy oil, tight gas, liquefied natural gas],

(2) huge inventory of oil and gas projects,

(3) the company has an exceptional balance sheet [it has a debt/equity ratio of 5% and has more cash than debt], has raised its dividend every year for the last 27 years and has a major stock buyback program.

(4) ongoing cost control program.

Negatives:

(1)    the most promising area for exploration are in politically risky areas,

(2)    while the company has replaced its proved reserves, much of it comes from acquisitions versus organic growth,

(3)    declining refinery utilization rate,

(4)    it is subject to extensive government regulations,

(5)    weather, especially in its offshore operations.

The company is rated A++ by Value Line, has a 6% debt to equity ratio and its stock yields 2.8%.

  Statistical Summary

                 Stock      Dividend         Payout      # Increases  
                Yield      Growth Rate     Ratio        Since 2004

XOM          2.8%         8%                36%              10
Ind Ave      2.6             9                   28                NA 

                 Debt/                        EPS Down       Net        Value Line
                 Equity        ROE      Since 2004      Margin       Rating

XOM         6%             18%            3                 8%           A++
Ind Ave     21               18             NA               7             NA

          Chart

            Note: XOM made good progress off its March 2009 low, surpassing the downtrend off its May 2008 high (straight red line) and the November 2008 trading high (green line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term, it is in a trading range (purple lines).  The wiggle red line is the 50 day moving average.  The Dividend Growth Portfolio owns a full position in XOM.  The upper boundary of its Buy Value Range is $90; the lower boundary of its Sell Half Range is $143.
           




11/14

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