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Exxon Is Currently Undervalued Based on a Positive Profit Outlook

July 18, 2012 | About:
Muhammad Bazil

Muhammad Bazil

3 followers
Exxon Mobile (XOM) had a good day last Wednesday, when Sonatrach, the Algerian energy firm disclosed that they were in talks with both Royal Dutch (RDSA) and Exxon Mobile on shale extraction in North Africa. The country is said to have approximately 600 trillion cubic feet of shale gas waiting to be developed. The country of Algeria said it will work to deregulate current restrictions on hydrocarbons in an attempt to help spur foreign shale investment.

At the close of the stock bell Exxon Mobile was up 1.53 percent ending at $84.38. The stock has had an interesting 12 months with a wide range of high and low values, $67.03-$87.94.

BP (BP) was up 1.61 percent ending at $40.29, with the stock not showing as much variability in its 12 month highs and lows at, $33.62-$48.34.

Chevron (CVX) shares were up .93 percent at $104.85. The trading range of the company’s stock after 12 months ranged between $86.68-$112.28.

ConocoPhillips (COP) was up 1.65 percent at $54.36. The 12-month range of highs and lows ran at $50.62 to $80.13.

Pushing for Alaska to Change Rate

The company recently asked Alaskan regulators to increase the amount the company is allowed to charge to ship crude through the trans-Alaska pipeline throughout the state.

The 26 percent increase, according to the company, was brought on by higher operating costs, but a lower volume traveling. The proposed rate increase while marginal for the company would generate an extra $10 million in revenues.

A Departing CEO

After a more than 40 year tenure at one of the world’s largest companies, Mr. Sherman Glass has elected to retire as President of Exxon Mobile.

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In his place is expected to be current company Vice President of Supply & Transportation, Mr. Darren Woods. The new appointment is expected to occur upon board approval on August, 1, 2012.

Glass started at Exxon in 1972 as a Baytown refinery engineer in Texas. From there he accelerated up the company ladder and through a series of management positions before becoming president in 2008.

Iraq Upset about New Oil Deal

A new set of disagreements is beginning as the Iraqi government shows disapproval of the local Kurdish Government’s plans with Exxon Mobile, which could jeopardize the energy company’s central government contracts.

Exxon Mobile currently has an agreement with the Kurdish government of Iraq to explore for oil in the Kurdish region. The semi-autonomous region has sparked a debate about who should control and manage oil contracts in the region: the state, or the local government, with the Kurdish government insisting on local rights, and the central government on the state.

The Kurdish government recently suspended a 100,000 barrel a day export pipeline on the basis that the central government was late to pay foreign contractors $1.5 billion.

Analysis

The company is currently valued at $394.6 billion, dividend making machine, operating nearly 37,000 gross wells. For 29 straight years the company has upped dividend payouts with a yield at 2.7 percent. Knowing a company can deliver on time every time given their capital expenditures is an important asset when looking to invest for retirement.

Looking at the company’s portfolio it is easy to understand the wide number of industries it is involved in. It is plain to see the company has not invested more than 50 percent of its resources in any one industry. Liquid Natural Gas, Deepwater, Heavy oil Sands – the company has shown their extraction methods to cover a large area.

The company is currently undervalued based on a positive profit outlook, with a profits to earnings ratio (PE) of 9.95, price to earnings to grow (PEG) of 1.06, price to sales (PS) .88, and a book ratio of 2.48. This company is the best on the planet at extraction and has the operating cash flow to prove it at $57.78 billion, and free cash flow of $22.66 billion. The company is expected to grow 9.84 percent in five years, buy.

About the author:

Muhammad Bazil
Muhammad Bazil is a financial journalist and editor for a variety of websites, public policy organizations, and book publishers. He has written hundreds of published articles and blog posts on topics including budgeting, credit management, real estate and investing. His articles have been featured on the homepage of Yahoo!, MSN and numerous local news websites.

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