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The Zacks Analyst Blog Highlights: Exxon Mobil, Chevron, Hess and CNOOC

Zacks Equity Research

For Immediate Release

Chicago, IL – February 13, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Exxon Mobil Corporation XOM, Chevron Corporation CVX, Hess Corporation HES and CNOOC Limited CEO.

Here are highlights from Wednesday’s Analyst Blog:

Why Chevron’s a Better Big-Oil Stock than ExxonMobil

With massive market caps of $256.1 billion and $210.3 billion, Exxon Mobil Corporation and Chevron Corporation dominate the energy sector. Both the companies’ businesses are primarily guided by oil and natural gas prices. However, there are some key factors need to be analyzed elaborately before ranking the two integrated energy firms.

Doppelgangers

ExxonMobil and Chevron are among the leading integrated energy players with strong presence in upstream and downstream operations.

ExxonMobil

The company has upstream presence in the United States and abroad. Apart from operations in the most prolific domestic play – Permian – ExxonMobil’s upstream portfolio includes Guyana and Brazil. In the Permian, the company plans to produce more than 1,000 thousand oil equivalent barrels per day (KoEB/D) by 2024.

Moreover, with 16 discoveries in the Stabroek Block, located off the coast of Guyana, ExxonMobil has estimated gross recoverable resources of more than 8 billion barrels of oil equivalent. In fact, the leading integrated energy player estimates 750,000 barrels of oil production per day from the offshore region by 2025. Other major energy players having interests in the Stabroek Block are Hess Corporation and CNOOC Limited. Additionally, in Brazil, the company has more than 2.3 million net acres of upstream resources.

ExxonMobil also has a strong downstream presence with interests in more than 20 refineries across the world. Notably, the company has estimated its total refining capacity at 4.7 million barrels of oil per day.

Chevron

The company’s core upstream assets comprise Permian and Deepwater Gulf of Mexico along with resources in Australia, Kazakhstan and Nigeria. In Permian, Chevron has 16.2 billon barrel of oil equivalent (BBoE) resources as of 2019-end, significantly up from 9.3 BBoE in 2017. Moreover, majority of the company’s refining capacity is located in the United States, while the rest is in Asia.

Both Are Dividend Aristocrats

If a company raises dividend for at least 25 successive years, it gets the status of dividend aristocrat. ExxonMobil has successfully managed to grow dividend payments over the past 37 years at an average annual growth rate of 6.2%. Meanwhile, Chevron has hiked dividend payments for 33 straight years (excepting 2015). 

Not only are these integrated energy players dividend aristocrats, the firms pay higher dividend yields than the Zacks S&P 500 composite. Currently, the dividend yield for ExxonMobil and Chevron is a respective 5.75% and 4.28%, way higher than the Zacks S&P 500 composite’s 1.68%.

Although it seems that dividend investors might choose ExxonMobil over Chevron for more than one percentage difference in their yields, the question lies with sustainability considering ExxonMobil’s aggressive capital spending plans.

Chevron’s Edge Over ExxonMobil

ExxonMobil has an aggressive capital spending program in place as compared to Chevron. In 2020, ExxonMobil is planning to invest $33 to $35 billion, while $30 to $35 billion will likely be allocated from 2021 through 2025. Chevron, in comparison, is planning to spend $18 to $20 billion in 2020. From 2021 through 2023, Chevron is planning to allocate $19 to $22 billion capital.

While ExxonMobil intends to invest heavily in coming years, this might require the company to divest assets and rely more on debt funding. This could weaken ExxonMobil’s balance sheet and lower the company’s free cashflow that will be available for dividend payments. This has probably justified the question of the company’s sustainability of paying higher dividend yields than Chevron.

Importantly, investors are constantly pressing companies to focus more on returns rather than solely on production. Hence, ExxonMobil’s aggressive capital spending program, mostly for oil and natural gas production, might have disappointed investors.

However, though Chevron has a conservative capital program in place, it is projecting compound annual production growth rate of 3-4% in five years, reflecting strong operational efficiencies. In case of the Zacks Rank as well, Chevron has a clear lead with a Zacks Rank #2 (Buy) while ExxonMobil carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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CNOOC Limited (CEO) : Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
Hess Corporation (HES) : Free Stock Analysis Report
 
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