Exxon Mobil (XOM) 2013 Review

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Exxon Mobil is the largest publicly traded oil company.  The company produces approximately 2.3 million barrels of oil and 13.2 BCF of natural gas daily, has reserves of over 24.9 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 12% 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 (7% 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 buy back 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)    weak natural gas prices,

(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 5% debt to equity ratio and its stock yields 2.6%.

  Statistical Summary

                 Stock      Dividend         Payout      # Increases  

                Yield      Growth Rate     Ratio        Since 2003

XOM          2.6%         8%                29%              10

Ind Ave       4.9            6                   21                NA 

                 Debt/                        EPS Down       Net        Value Line

                 Equity        ROE      Since 2003      Margin       Rating

XOM         5%             20%           2                 8%           A++

Ind Ave     20               15             NA               7             NA

     Chart

Note: XOM stock struggled to advance off its March 2009 low.  While it quickly surpassed the downtrend off its May 2008 high (red line), it took a long time for it to successfully challenge the November 2008 trading high (green line).  Long term, it is in an uptrend (straight blue lines).   Intermediate term, it is in an uptrend (purple lines).  The wiggly blue line is on balance volume.  The Dividend Growth Portfolio owns a full position in  XOM.  The upper boundary of its Buy Value Range is $78; the lower boundary of its Sell Half Range is $118.

           

http://finance.yahoo.com/q?s=XOM

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