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Exxon Mobil and Chevron Corporation. - Petroleum Industry structure: - 5 sectors of operations (Upstream, downstream, marine, pipeline, and service/supply)

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Presentation on theme: "Exxon Mobil and Chevron Corporation. - Petroleum Industry structure: - 5 sectors of operations (Upstream, downstream, marine, pipeline, and service/supply)"— Presentation transcript:

1 Exxon Mobil and Chevron Corporation

2 - Petroleum Industry structure: - 5 sectors of operations (Upstream, downstream, marine, pipeline, and service/supply) - Extremely high barriers to entry allowing for sustainable profits in the long run - Supply of oil is controlled by a cartel regime (OPEC) - Economic market form is close to Oligopoly - Few large sellers dominate industry - High barriers to entry, competitors cannot enter to reduce profits of participating firms - Standardized product - Oil and Gas industry is described well by Cournot-Nash Models of competition ( Two equally positioned firms competing on quantity, not price) - Major Players (Integrated): - Exxon, Chevron, Royal Dutch Shell, British Petroleum

3 Operates as an Integrated Oil Company: -Global exploration, extraction, refinement, transportation and marketing of petrol and chemical Products Market Statistics: -Market Cap (intraday) 5 :149.60B -Market Value Debt: B -Enterprise Value (9-Mar-10) 3 :151.60B -Trailing P/E (ttm, intraday): Price/Sales (ttm):0.94 -Price/Book (mrq):1.63

4  WACC = [(D/V)*(YTM*(1-T))]+[(E/V)*(rf + β(Erm - rf)]  Cost of Debt = Weighted Avg. YTM (1-Marginal Tax Rate)  Equity = rf + β(Erm - rf)  Pre. Stock = Div/Price (Chevron does not have P.S.) DCF Analysis Results:  2014 FCF $140,  Terminal Value $91,995  PV $2,076, Millions Per Share Price Approx $ 685 Current Share Price ($74.60)  Analysts Recommendations Buys: 6 Buy/Hold: 8 Hold: 5 Hold/Sells: 0 Sells: 0

5 Operates as an Integrated Oil Company: -Global exploration, extraction, refinement, transportation and marketing of petrol and chemical Products Market Statistics: -Market Cap (intraday) 5 : B -Market Value Debt: B -Enterprise Value (9-Mar-10) 3 :312.61B -Trailing P/E (ttm, intraday): Price/Sales (ttm):1.13 -Price/Book (mrq):2.84

6  WACC = [(D/V)*(YTM*(1-T))]+[(E/V)*(rf + β(Erm - rf)]  Cost of Debt = Weighted Avg. YTM (1-Marginal Tax Rate)  Equity = rf + β(Erm - rf)  Pre. Stock = Div/Price (Exxon Mobil does not have P.S.) DCF Analysis Results:  2014 FCF $130,273  Terminal Value $94,249  PV $3,997,414 Millions  Per Share Price Approx $ 845 Current Share Price ($67.00)  Analysts Recommendations Buys: 5 Buy/Hold: 3 Hold: 10 Weak Hold: 1 Sells: 0

7  S&P: Fundamental outlook for the Integrated Oil & Gas sub- industry for the next 12 months is positive, on expectations of improved global oil consumption amid an economic recovery. S&P projects that S&P 500 Energy sector operating EPS will drop about 67% in 2009, but rebound about 89% in  Financial Data Change in 2009 Drop In Net Income  Exxon Mobil Net Income $19,280 for 2009 vs. $45,219 for 2008 (57% drop)  Chevron Net Income $10,483 for 2009 vs. $23,931 for 2008 (56% drop)

8  Buy Exxon Mobil current price $67  High price over past three years is $93 (April 2008) and it should head back to that level within the next 18 months with the economic recovery or 63.5% annual return  Buy Chevron current price $74.33  High price over the past three years $99 (June 2008) and it should head back to that level within the next 18 months or 53.7% annual return


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