Exxon Planning For The Future

11/19/2012


  Recent Price
$86
  Dividend
$2.28
  Yield
2.6%
  P/E Ratio
9
  Shares (millions)
4,597
  Long-Term Debt as % of Capital
5%
  52-Week Price Range
$93.67 - $73.90

Sometimes even a giant can go unnoticed.

With Chevron ($105; CVX) facing legal attacks in South America and BP ($41; BP) trying to settle economic-damage claims related to its 2010 oil leak in the Gulf of Mexico, somehow Exxon Mobil ($86; XOM), the second-largest U.S. company by both revenue and stock-market value, is keeping a relatively low profile.

But don't mistake a lack of attention for a lack of activity. In recent weeks, Exxon has announced a number of acquisitions and drilling initiatives and reported September-quarter results that topped expectations. Excluding special items, exploration-and-production income fell 29%. Lower production weighed on upstream earnings, but asset sales in the year-earlier period and currency effects accounted for most of the decline. In contrast, refining income more than doubled, with higher margins driving more than half of those gains.

Analysts don't expect much from Exxon, projecting per-share-profit gains of 2% in both the December quarter and full-year 2013. Global oil consumption is on pace for its third consecutive annual record, but near-term profit growth hinges on energy prices. Exxon, a Buy and a Long-Term Buy, trades at a discount of at least 9% to its three-year average price/earnings and price/sales ratios.

Sowing now to reap later

An October agreement to buy Celtic Exploration ($26; CEXJF) of Canada for $3.1 billion gives the company access to 650,000 acres of shale formations, much of it underexplored and believed to be rich in oil and natural-gas liquids. With NGL plants planned on Canada's West Coast to serve the lucrative Asian market (where prices are high and demand robust) the Celtic acquisition positions Exxon to profit from the opening of new trade routes over the next several years. Exxon is also expanding in the Black Sea, the Arctic, Siberia, and the U.S. High Plains.

In another part of the world, Exxon has put its stake in a development up for sale. After Exxon contracted with the Kurdish Regional Government to drill on land Iraq claims, Iraq issued an ultimatum: Stop working with the Kurds, or you lose access to government-sanctioned projects. Exxon has chosen to forego government-sanctioned wells already in production, instead investing in a presumably richer arrangement with the Kurds.

Exxon's financial strength allows it to take short-term hits in pursuit of future success. In the 12 months ended June, Exxon generated nearly $57 billion in operating cash flow, the highest of any U.S. company and 20% more than its own net income. After investing $115 billion in capital projects over the last five calendar years, the company is on pace this year to top the $31 billion spent in 2011.

Sharing the wealth

Exxon doesn't just invest in its own business. In the last 20 quarters, it has paid out $43 billion in dividends (yield is 2.6% today versus 1.6% five years ago) and spent $110 billion repurchasing stock (share count down 17% over the last five years). Investors can obtain an annual report for Exxon Mobil Corp. at 5959 Las Colinas Blvd., Irving, TX 75039, (972) 444-1000, www.exxon.com.

EXXON MOBIL
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Sep '12
2.09
vs.
2.13
+ 3%
92.57
-
82.83
10 - 9
Jun '12
3.41
vs.
2.18
- 7%
87.67
-
77.13
11 - 9
Mar '12
2.00
vs.
2.14
+ 9%
87.94
-
83.19
10 - 10
Dec '11
1.97
vs.
1.85
+ 15%
85.63
-
69.21
10 - 8
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2011
433.53
8.42
1.85
88.23
-
67.03
10 - 8
2010
341.58
6.22
1.74
73.69
-
55.94
12 - 9
2009
275.56
4.01
1.66
82.73
-
61.86
21 - 15
2008
425.07
8.44
1.55
96.12
-
56.51
11 - 7
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
84
54
78
66
72
75
59

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.
   NM Not Meaningful.


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