|Bid||115.62 x 800|
|Ask||115.89 x 2200|
|Day's range||115.36 - 116.65|
|52-week range||100.22 - 127.60|
|Beta (3Y monthly)||0.82|
|PE ratio (TTM)||15.00|
|Earnings date||31 Oct 2019 - 4 Nov 2019|
|Forward dividend & yield||4.76 (4.07%)|
|1y target est||137.59|
A U.S. government report reveals that crude inventories rose by 1.6 million barrels for the week ending Aug 9, very different to the 2.7 million barrels drawdown that energy analysts had expected.
Saudi Aramco, which could command a staggering valuation of $2 trillion when it makes stock market debut in 2020-2021, is the most profitable company in the world.
(Bloomberg Opinion) -- Great thirty minutes, guys.Monday morning’s much-ballyhooed earnings call from Saudi Arabian Oil Co., or Saudi Aramco, was remarkable chiefly for its brevity. About 25 minutes in, the host was reminding people to get their questions into the queue. Just after 9:30 a.m. in New York, it was time for closing remarks.Aramco, the biggest oil major in the world, is owned by the government of Saudi Arabia, so the fact it was putting anyone on the line to talk about a published set of accounts is noteworthy. And, to be fair, they had blocked out an hour. Yet the call yielded little new information. That partly reflected the caliber of the questions, with the first amounting to “please explain why your company is so awesome.” But it was also a function of the usual reticence of major companies, compounded by the fact that this one is, after all, not merely unlisted but a virtual state within a famously secretive state.It was, therefore, entirely understandable that Aramco didn’t offer up much detail on plans to buy a 20% stake in the refining and chemicals business of India’s Reliance Industries Ltd., only made public a few hours before the call got underway.On the other hand, it was unfortunate that CFO Khalid Al-Dabbagh effectively dodged a decent question on Aramco’s capital expenditure and dividend policy. If, as recent reports suggest, Aramco still intends to go through with its IPO and this was a dry run for that, then questions about cash flow and dividends will be the ones that really matter.In a world where energy stocks have fallen out of favor because of a legacy of excess spending and concern about faltering demand growth, the majors are valued chiefly for their dividends. A public Aramco would be no different in this respect (see this).The first-half numbers just published confirmed Aramco is a cash-flow juggernaut, generating free cash flow after capex of almost $38 billion and paying its sole shareholder a dividend of more than $46 billion. The details beneath such numbers matter, though. After all, it’s immediately obvious that, despite generating more free cash flow in the first half than BP Plc, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell Plc, and Total SA combined, Aramco borrowed to pay that dividend to the government. While net debt is just 2% of capital employed, there was a $28 billion swing in net indebtedness in the space of 12 months. And Aramco’s capex in the first half looked low – which is why it was questioned – and Al-Dabbagh did allow that “timing” was one reason for that, suggesting it would rise in the second half of 2019.Roughly 40% of the first-half dividend was an outsize special payment predicated on 2018’s “exceptionally strong financial performance,” yet sitting oddly with a year-over-year decline in first-half profit. Coming alongside Aramco’s acquisition of the government’s majority stake in Saudi Basic Industries, or Sabic, this reinforces the sense that the company chiefly represents a financing channel for a government facing chronic deficits at current oil prices. To which one might respond: Duh, like, it’s a national oil company, what exactly did you think it was for?This is the central issue when it comes to Aramco’s valuation, however, because the closeness of that relationship with the government affects the risk premium on the company’s earnings. Taking the 12 months through June as a whole, Aramco’s capex of about $35 billion left it with free cash flow of about $88 billion, more than enough to fund $72 billion of dividend payments. Putting those on an Exxon-like yield of 5% implies a value of $1.45 trillion.Yet, assuming ordinary dividends are running at $52 billion a year – as the accounts suggest – about $20 billion of that payout is akin to the more discretionary buybacks oil majors use to distribute exceptional income. Aramco’s payout was 99% of earnings in the first half of 2019 versus just 52% a year earlier. That cyclical element should be priced at a discount to ordinary dividends, especially in light of Aramco’s role in Saudi Arabia’s public finances. Price the dividend at 6%, and the value drops to $1.21 trillion; at 7%, a shade higher than the yield for BP and Shell, it falls to $1.03 trillion.These are still very big numbers (and in line with the valuation I put together last year). They remain, however, far short of the $2 trillion valuation bragged about by Prince Mohammed bin Salman; and this despite those numbers reflecting, in part, an “exceptionally” strong year for the company.If Aramco’s owner still wants to get even close to a two in front of those twelve zeroes on the trading screen some day, then the company needs either a fundamental shift in the outlook for the oil market or a fundamental reappraisal of its ability to squeeze even more dividends out of that market. It has only some influence over the first option. The second would require at least a bit more time on the phone. Update: A typographical error in an earlier version of this story put Aramco’s implied valuation with a 6% dividend at $1.21 billion instead of $1.21 trillion.To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Israel's Delek Group said on Monday it was in talks with a range of investors to raise up to $300 million ahead of a planned listing of its Ithaca Energy business. Delek said it was negotiating with investment funds, trading companies and international financial institutions to make a capital investment against an allocation of shares in Ithaca. In May, Delek moved closer to a listing of Ithaca when it bought out most of Chevron's British North Sea oil and gas fields for $2 billion.
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be...
Royal Dutch Shell (RDS.A) stock has slumped 10.8% so far in Q3. Shell’s dividend yield has risen to 6.6%, the highest among its peers.
Chevron Corp said on Thursday it has launched one of the world's largest carbon capture and storage projects, injecting CO2 into a deep reservoir under an island off Western Australia at its Gorgon LNG project. The carbon storage project was delayed by more than two years after Chevron discovered problems with valves and pipeline equipment during commissioning of the A$2.5 billion ($1.7 billion) injection system. Gorgon is the biggest emitter of carbon emissions out of Australia's 10 LNG plants, with gas from the Gorgon field containing 14% CO2.
(Bloomberg) -- The last major U.S. oil producer in Venezuela is warning that developments in the crisis-torn South American nation could hurt its earnings.“Future events related to the company’s activities in Venezuela may result in significant impacts on the company’s results of operation in future periods,” Chevron Corp. said Wednesday in its latest 10-Q filing with the U.S. Securities and Exchange Commission.The language has evolved from the company’s previous quarterly filing, when it said developments in the country could lead to “increased business disruption and volatility in the associated financial results.”Chevron puts the carrying value of its investments in the country at about $2.7 billion. It recognized $21 million in losses from its share of net income from Venezuelan equity affiliates in the first half of the year.Last month the company won a reprieve from the U.S. government sanctions, securing a 90-day waiver from the U.S. Treasury Department that allows it to continue operating in Venezuela (as did four American oil service companies). But most other government agencies involved in the deliberations opposed any extension, and it’s unclear whether Chevron will get another waiver once the current one expires.Chevron said last week that second-quarter net production of synthetic oil from its Venezuela affiliate was zero, compared with 24,000 barrels a day a year earlier. Net oil equivalent production in Venezuela during the quarter averaged 34,000 barrels, according to Wednesday’s filing.To contact the reporter on this story: Simon Casey in New York at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Carlos Caminada, Joe CarrollFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Integrated majors ExxonMobil (XOM), Chevron (CVX) and Royal Dutch Shell (RDS.A) were able to grow their production in the second quarter from a year ago.
(Bloomberg Opinion) -- So, energy investors, to recap:The U.S. just branded China a currency manipulator in the latest escalation of the trade/currency/who-will-run-things-in-the-21st-century war; Venezuela – where, like fellow OPEC member Iran, Washington thinks some regime modification is in order – just got some new sanctions; The SPDR S&P Oil & Gas Exploration & Production ETF closed at its lowest level since March 9, 2009 (the week the S&P 500 hit bottom after the financial crisis).(1)Interesting times. And at such times, oil investors would typically run for the relative safety of the majors, and one in particular: Exxon Mobil Corp. Except that it is also interesting times, or timing, for Exxon.Today’s apparent reprieve in the currency war, with the Chinese yuan nudging back below 7 to the dollar, is far from an armistice. The long list of U.S. grievances against China, from FX to fentanyl, along with President Donald Trump’s November 2020 timetable and President Xi Jinping’s lack of one, portend a drawn-out conflict. This is why Brent dipped briefly below $60 this morning, even though the U.S. has not one but two OPEC producers under tightening sanctions.Oil majors, with their bigger balance sheets and diversification, usually do better than their smaller brethren at such times. And lately they have.The latest earnings from Exxon and Chevron Corp., however, suggest the smaller of the two may offer a better refuge this time around.Exxon missed the consensus earnings estimate (after stripping out a tax-related gain in Canada). The real issues lay beneath that number, starting with the nominally defensive chemicals business. Profits here collapsed by almost 80% compared to the same quarter in 2018, to their lowest in years. Exxon characterized this as a temporary problem of excess capacity, albeit one that was likely to weigh on pricing for the next 12 months. What’s tricky about this is (a) excess supply is always also a function of demand, and (b) the trade war could have something to say about that.Exxon’s real engine, the upstream business, isn’t suffering to nearly the same degree but isn’t firing on all cylinders either. Absent that tax benefit, earnings were flat with the first quarter, despite higher crude oil prices. Lower output and falling gas prices were to blame, but so too is Exxon’s weaker position vis-à-vis Chevron in their increasingly important shale portfolios. The latter’s U.S. upstream business has earned more than $2 for every one Exxon has earned over the past four quarters. If oil prices remain weak (or even weaken further), Exxon looks more vulnerable in this regard.There is an element of luck at play here, and timing is against Exxon. When oil prices first collapsed toward the end of 2014, Chevron was in the doghouse because it was locked into heavy spending on some major liquefied natural gas projects. It is now over that hump – just as Exxon has moved into spending mode.The result is that, while Exxon had to borrow to cover its dividend in the second quarter, Chevron’s free cash flow covered its own payout twice over; and it’s resuming buybacks after its brief pursuit of Anadarko Petroleum Corp. (which also netted it a break fee and plaudits for walking away).Those payouts are critical in keeping an already skeptical investor base onside. But while Exxon now yields almost 5% on dividends versus Chevron’s 4%, the latter’s buybacks chip another 2% or so of yield. In terms of trailing free cash flow yield, there’s no contest.Dividend yield aside, on every measure from earnings to book value, Exxon continues to trade at a premium. As insurance against what promises to be an ever more interesting year or so, that’s tough to justify.(1) A note on this ETF, the XOP, to use its ticker. Though it is billed as focused on exploration and production, it actually has a hefty weighting of refining stocks, too – six out of its top 10 holdings, in fact. Which means the E&P sector’s performance is worse than even the XOP suggests. Look at the Russell 3000 Crude Producers sub-index, for example, and it is actually substantially below the level of early 2009. (Hat-tip to Kevin Kaiser, @kfkaiser17, for pointing this out).To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
ExxonMobil’s (XOM) earnings fell in the second quarter. After the earnings, JPMorgan Chase cut its target price on ExxonMobil stock from $85 to $83.
(Bloomberg) -- The world’s biggest oil companies have been steadily shifting investments toward natural gas, driven by an emerging globally traded market and environmental concerns. But right now they’re taking a hit as prices tank.Supermajor energy producers -- Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., Total SA and BP Plc -- saw a steep drop in the prices they received for gas in the past quarter. Alongside a dip in refinery margins, weakness in gas skimmed off second-quarter earnings.Gas traded at the U.S. benchmark Henry Hub in Louisiana is at the lowest seasonal levels in two decades as production from Appalachia and West Texas breaks records. In Europe and Asia, spot prices for the liquefied form of the fuel have sunk thanks to a wave of new export terminals pumping new cargoes into the market.Gas, a fuel for furnaces and power plants as well as a raw material for chemical makers, offers the best long-term demand growth among fossil fuels, particularly when it’s super-chilled to liquefy it for transport aboard ships.Billions and BillionsShell, a pioneer of the industry that’s been dealing in LNG for decades, and BP have pumped up their proportion of gas output in recent years. Exxon and Chevron, meanwhile, have bet tens of billions of dollars on a handful of massive LNG projects around the world.“Gas has been one of the headwinds impacting earnings for the majors, but the actual impact on the bottom line is relatively modest,” said Devin McDermott, an analyst at Morgan Stanley.Oil-Linked PricingThat’s thanks in part to long-term LNG contracts that are indexed to crude rather than gas, a longstanding convention that stems from overseas buyers’ reluctance to be tied to regional gas benchmarks in places like the U.S. or northwest Europe.Still, low prices will continue to weigh on the supermajors. Gas supplies shows no sign of abating, especially in the Permian Basin, where drillers seeking crude find themselves holding vast quantities of the less-valuable gas that comes out of the same wells -- an unintended byproduct.Local gas prices have even turned negative thanks to a lack of pipeline capacity to haul it away, leaving many producers with little choice but to burn off excess supplies in a process known as flaring.Chevron, which doesn’t flare any of its Permian gas, is aiming to ship 25% of its gas from the field to other markets where prices are higher by the end of this year. By the end of 2020, the company wants to increase that to 60% as new pipelines open.Far EastThe glut extends as far as Japan, where spot prices have dropped in the last six months, according to Exxon. So far this year, Asian LNG demand is up just 3%, an executive with the company said, while global supply is up more than 10%.Global LNG supply will exceed demand for the next three years before the market tightens in 2022, according to BloombergNEF. At that time prices will likely surge.The majors will likely keep their eyes on the prize, McDermott said. “You look globally at oil demand versus gas demand,” he said. “Oil demand grows at a fraction of GDP; gas demand has grown about 6% on average.”To contact the reporter on this story: Rachel Adams-Heard in Houston at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Joe Carroll, Pratish NarayananFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.