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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