On Mar 7, 2014, we issued an updated research report on
). The company posted fourth-quarter 2013 earnings of $1.91 per
share, beating the Zacks Consensus Estimate by a penny. The beat
came at a time when a sharp drop in refinery utilization rates
hurt the fortunes of refiners. Exxon's outperformance was backed
. However, earnings per share fell 13.2% from $2.20 in the
year-ago quarter. Total revenue decreased 3.3% year over year to
$110.9 billion, and also came below the Zacks Consensus Estimate
of $114.9 billion.
ExxonMobil is the world's best run integrated oil company given
its track record of superior return on capital employed. As the
largest publicly traded oil company, ExxonMobil has long been a
core holding for investors seeking a defensive name with
continued dividend growth.
ExxonMobil is fairly active in its investment program. The
company plans to spend about $185 billion over the next five
years - up 29% from the last five-year period. The capex covers
as many as 21 important oil and gas projects currently under the
anvil and are estimated to accumulate over 1 million net
oil-equivalent barrels per day by 2016.
Free cash flow generation remains strong, and the company is
consistently returning it to shareholders. It increased its
dividend in Apr 2013 at an annualized $2.52 per share, up 10.5%
sequentially and yielding an attractive 2.69%. The company also
has a solid share buyback program in place.
The company boasts of diversified operations across the world
with several new projects expected to come online through 2014.
While Exxon functions in all corners of the globe, the main areas
of focus for the coming years include the U.S., Canada,
Kazakhstan, West Africa, Australia, Russia, Angola and Iraq for
new volumes. On the exploration front, the company's focus
includes unconventional natural gas across North America as well
as offshore regions, including the Gulf of Mexico. Notably, Exxon
achieved success in the exploration of a well offshore Tanzania,
where it came across a massive amount of recoverable gas of high
We however remain skeptical due to the company's sharp drop in
refinery utilization rates during the fourth quarter. Owing to
lower crack spreads and narrowed crude oil differentials,
fortunes of refiners industry wide went southward. In the fourth
quarter, ExxonMobil's refinery throughput averaged 4.5 million
barrels per day (MMBPD), down 8% from the year-earlier level of
4.8 MMBPD. As a result, the segment recorded profit of $916
million against $1.8 billion in the year-ago quarter.
Key Picks from the Sector
ExxonMobil currently retains a Zacks Rank #3 (Hold), implying
that it is expected to perform in line with the broader U.S.
equity market over the next one to three months.
Meanwhile, one can consider better-ranked players in the energy
Patterson-UTI Energy Inc.
Helmerich & Payne Inc.
Warren Resources Inc.
). All the stocks sport a Zacks Rank #1 (Strong Buy).
HELMERICH&PAYNE (HP): Free Stock Analysis
PATTERSON-UTI (PTEN): Free Stock Analysis
WARREN RSRCS (WRES): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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