Exxon Mobil Corporation (XOM) is a global crude oil and natural gas company that discovers, refines, transports and markets oil, gas and petroleum products in North America, South America, Europe, Africa and the Asia-Pacific. Exxon Mobil has four business segments: upstream, chemical, downstream and natural gas/power marketing. Additionally the company is involved in manufacturing petrochemicals, hydraulic fracturing, liquefied natural gas and vehicle technology. In the first half of 2015, Exxon Mobil reported total revenues of $141.73 billion. The company holds the title of the largest publicly traded company.
Exxon Mobil paid a third quarter dividend of $0.73 per share on August 11, 2015, flat compared to the prior quarter but up about 6% year-over-year. The company has grown its quarterly dividend at an average annual rate of 6.4% over the last 32 years and has been paying dividends since 1911. Exxon Mobil’s annualized dividend has grown from $1.85 per share in 2011 to $2.92 per share in 2015, an increase of approximately 58% in just 4 years. Analysts expect dividends to grow by at least 1% in 2016. The company recently reported free cash flow of approximately $1.7 billion, which cannot cover all future dividend payments, but it does put the company ahead of its competition as far as dividend coverage. Exxon Mobil currently offers a dividend yield of 3.92%.
Exxon Mobil shares closed at $75.07 on 8/28/2015, giving the company a market capitalization of $313 billion. Shares are trading towards the low end of the company’s 52-week low-high range of $66.55-$99.59 and are down about 24% over the last year. Earlier this month, RBC Capital maintained Exxon Mobil at an Outperform rating with a $96 share price target, representing 28% upside potential. Bullish analysts have a high price target of $100 per share for Exxon Mobil, which gives the company 33% upside. The company reported earnings of $5.62 per share, giving the company a price to earnings ratio of 13.36x at $75.07 per share. Exxon Mobil’s payout ratio of 71.2% is significantly higher than the company’s top competition and industry average.
For the three months ended June 30, 2015, Exxon Mobil reported total revenues of $74.11 billion, down approximately 33% year-over-year on the sharp drop in oil prices over the last 2 years. The loss in revenues is also tied to a 69% decrease in non-US upstream earnings. Despite the decrease in revenue, Exxon Mobil outperformed analysts’ expectations of $70.26 billion in revenue for the second quarter. Oil prices have hit a six year low but are widely expected to rebound and drive up Exxon Mobil revenue in 2016.
Exxon Mobil reported a significant find in the Atlantic Ocean off the coast of Guyana which local government says could hold oil and gas worth more than 12x the country’s GDP of $3.23 billion. Management has yet to release an official statement regarding the discovery. Experts estimate the find to be over 700 million barrels.
Exxon Mobil entered into a sale and purchase agreement to sell its 50% stake in Chalmette Refining LLC to PBF Energy Inc. PBF Energy will receive a refinery and production facilities in New Orleans, Louisiana. Exxon Mobil management is actively rebalancing the company’s portfolio of assets to meet its global business strategy. The deal is expected to close by year-end 2015.
Additionally, Exxon Mobil reversed its 160,000 barrels per day North Line pipeline in northeastern Texas to transport crude oil to refineries in Louisiana to grow access to the Permian Basin. The company recently entered into two agreements to grow its presence in the Permian Basin by 48,000 acres, bringing the company’s total presence in the area to 135,000 operated net acres. Exxon Mobil also entered into a $2.05 billion joint development partnership agreement with Indonesian state-owned company Pertamina to develop gas fields in Tiung Biru and Jambaran. The fields will add to Exxon Mobil’s upstream business segment and are expected to contain over 600 million barrels of oil.
In June 2015, Exxon Mobil received approval from the US Department of Energy to export liquefied natural gas to countries not participating in a free-trade agreement with the US. The approval guarantees the company the right to export up to 20 million metric tons of LNG until 2045. The exports will come from an Alaskan terminal. The company is also seeking approval for LNG exports to non-free-trade agreement countries for terminals on the Gulf Coast.
Despite a 60% drop in crude oil prices, Exxon Mobil remains relevant oil and gas company as its chemicals and refinery business continues to improve bottom line margins. The company’s Debt-to-EBITDA ratio is well below competitors, which means it can easily pay off debt quicker than others. It also means Exxon Mobil is positioned to take on additional debt for lucrative investment opportunities. Industry experts are aware revenues are softer than previous years but have incorporated that into the company’s stock price. The company has instituted several costs cutting measures in noncore segments of its upstream and downstream operations, which are expected to show up in 2016 revenue and earnings. Investors should note that oil prices are at all-time lows and Exxon still continues to provide a stable dividend stream with a reasonable dividend yield. Oil and gas experts expect oil prices to somewhat increase which should help Exxon Mobil revenues and net income. Exxon Mobil is a safe play for investors looking for solid income now and the potential for stock appreciation in the future.