As oil has been on the climb again today, shares of ExxonMobil (XOM) traded up to a new 52-week high. The stock hit a high of $70.83 before finishing out the session at $70.72, up $1.09.Oil moved higher on two main factors today. First, BP (BP) has hit some more unexpected problems in the Prudhoe Bay which has forced the company to cut another 90,000 barrels of crude output after discovering a failure in a natural gas compressor. With this reduction, output has now fallen to 110,000 barrels per day for the country's largest oilfield (from around 400,000 a month a ago). While today's shutdown should only last a couple more days, it has to raise more concerns over just what exactly is going on with BP in Alaska. Earlier this week I wrote about how the company has been accused by its own employees of deliberately manipulating data to show the Prudhoe Bay field better off than it actually proved to be. As we continue to see more problems unraveling for the company we have to start to wonder what is next?
Another factor in rising oil has been the ongoing situation with Iran. While many had hoped that some sort of resolution could be made regarding the country's pursuit of nuclear power that just does not seem to be in the cards. Iran, the world's fourth largest oil producer has until August 31 to respond to demands from the U.N. Security Council to stop enriching uranium or have sanctions imposed on them. On Tuesday the country asked for more negotiations, but The United States said the statement fell far short of Security Council demands. So with no end in sight on the Iran situation we are still left with the possibility of U.N. sanctions and retaliation by Iran of taking oil off the markets.
Between the BP shutdown and the Iran situation crude has traded up to a high of $72.50 on the day and will more than likely continue to climb to close out the week. And while all of this news is not going to help us out at the gas pump, it is providing quite a lift for ExxonMobil shareholders.
Let's take a look at a 52-week chart on the stock:
(chart courtesty of thinkorswim)
Here is how other oil companies did in today's action:
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Reader Comments (Page 1 of 1)
8-24-2006 @ 9:22PM
HALL said...
I hate Exxon/Mobil! They are killing the low and middle class people!I hope a slow and very painful death to all those assholes that have anything to do with Exxon/Mobil. Die slow, muther fuckers!!!!!!!!!
8-25-2006 @ 6:15AM
CrossProfit said...
Here is a reprint of an article that was published on Seeking Alpha on August 20, 2006. Notice that the article was published 4 days before XOM hit its temporary new high for the year.
Long on Chevron (CVX) or Exxon Mobil (XOM)?
By Saul Sterman (CrossProfit.com)
On 8/17/06 Hilary Kramer (the other Cramer) from AOL published an article comparing Chevron (CVX) with Exxon Mobil (XOM). Her conclusion was that Chevron’s future growth potential was better than Exxon Mobil’s due to the massive size of Exxon Mobil.
We like CVX and agree that high oil prices should continue to generate above normal earnings for Chevron.
However we note down two points.
1) CVX has higher exposure to several risky areas in the world. Venezuela is becoming a serious problem.
2) Exxon Mobil (XOM) on the whole or as a percentage of its business, has less exposure to high risk areas. This is undisputed unless you view Qatar and Canada as high risk locations, we do not.
Hilary stated that XOM can not possibly grow as fast as CVX simply because it is already nearly three times the size of CVX. In our opinion this has been proven to be a fallacy over the past 3 years.
In general when one hears that smaller companies grow faster than larger ones, this is in reference to a company that a miniscule bump in revenue turns into big percentages. For example; a company that has sales of $10 million dollars could grow 50% by increasing sales by $5 million. A company that has sales of $10 billion dollars would have to increase sales by $5 billion in order to achieve the same growth rate. Obviously it is easier to add $5 million in sales than to add $5 billion.
CVX and XOM are both mega cap corporations. It is just as difficult for CVX to grow 5% as it is for XOM. It is just as difficult for CVX to add $5 billion in sales as it is for XOM to add $15 billion. They are both members of the same clubhouse, neither can be considered small or micro cap!
Further comparison as of 08/17 reveals the following;
CVX’s market cap = 146 billion, trading at a trailing PE 0f 9.1 with a dividend yield of 3.2%.
XOM’s market cap = 405 billion, trading at a trailing PE of 10.7 with a dividend yield of 1.9%.
The question is whether CVX really is the better choice. On the surface CVX stock looks more attractive because it is trading at a lower multiple (9.1) and is paying a higher dividend. Sometimes lower multiples and higher dividends portray weakness. Which one is it? Further analysis reveals the complete picture.
At CrossProfit we emphasize fundamental analysis and delve into technical analysis only upon completion of rigorous fundamental analysis. The CrossProfit evaluation line is based on fundamentals.
The following are some of the fundamentals from our proprietary research/analysis.
Reserves Replacement:
CVX = 58% (not good at all, hampers future growth)
XOM = 105% (enables future growth)
Reliance on U.S. Economy:
CVX = 45%
XOM = 31%
(Upon a slowdown in U.S. consumption CVX is more likely to take a hit.)
Unexplained / Unquantifiable Activities:
CVX is reducing holdings in Europe and Scandinavia.
XOM is rapidly expanding in LNG and deep sea drilling. (Not yet proven to be cost-effective although XOM must have done their homework. At CrossProfit we can not view this as a positive factor until the figures are in.)
2006 & 2007 Projected Earnings Growth:
CVX, 2006 = 19% & 2007 = 1%
XOM, 2006 = 18% & 2007 = 6%
Note: We recently revised downwards XOM 2006 earnings growth from 21% to 18% due to the Alaskan pipeline fiasco. (XOM has a 34% stake in the BP project.)
CrossProfit Evaluation Line (meaning buy below the line and sell above the line):
XOM EOL 03/07 = 75.80
CVX EOL 10/06 = 65.30
For those that are unfamiliar with the term, EOL = end of line. The evaluation line is a twelve month forward looking line that specifies a risk/reward evaluation factoring in market volatility and determines whether or not an investment opportunity exists. Towards the ‘end of the line’ the line is usually less accurate as the evaluation was based on data available a while ago. In plain English, the CVX evaluation line is less reliable because it ends in 10/06.
Based on the above, XOM has a 10-12% upside and CVX is currently slightly overvalued. All data excludes dividends.
Sorry Hilary my esteemed colleague, but we differ on this one.
Disclosure: This article was written by a CrossProfit analyst and reflects the opinion of CrossProfit.com. CrossProfit is not affiliated with AOL or Hilary Kramer.
http://www.crossprofit.com