Will Exxon Boost Its Dividend?
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ExxonMobil (NYSE: XOM) is the world's largest publicly-traded oil company, with around 80% of its earnings coming from outside the U.S. Exxon has a variety of operations, ranging from upstream to downstream, and even some chemical segments. Exxon's upstream operations include nearly 25 billion in oil equivalent barrels in proven reserves, with nearly a 50/50 oil and gas split. Its downstream operations include refining and marketing products, with refining capacity of over six million barrels per day. Mega-billionaire Bill Gates is the top fund owner in Exxon (check out Bill Gates' biggest bets).
Exxon reported better than expected 3Q results on the back of strong refining margins. Driving future growth will be Exxon's XTO Energy acquisition, which gave the energy company access to significant unconventional resources. This will also help it to expand its handle on the natural gas market. Exxon expects to spend $185 billion over the next five years, which is up 30% from the 5-years prior.
The oil giant boasts an impressive balance sheet and is one of the few companies still sporting a triple-A credit rating. Exxon has an impressive long-term debt to equity ratio of only 5% and has over $13 billion in cash on hand. Exxon also has the lowest payout ratio of the five energy stocks listed here at 22%. Assuming Exxon boosts its payout to the peer average (35%), its dividend yield could increase from its current 2.6% to 4.2%.
Chevron (NYSE: CVX) is one of the major energy players alongside Exxon. Production fell 3% in 2011 on the back of a pipeline incident in Thailand. Growth is expected to be driven by new liquid natural gas projects in Australia and Asia. These initiatives will fuel production growth of 1% through 2014, and then 4% from 2015 to 2017. The one downside for Chevron is its liquid-heavy portfolio mix, as nearly 70% of its assets are focused in this arena.
This oil giant has been pushing to make its downstream operations smaller and less complex, with a whopping 90% of its 2012 CapEx budget expected to go toward exploration and production. Ken Fisher - founder of Fisher Asset Management - is Chevron's top fund owner with over 3.5 million shares (check out Ken Fisher's newest picks).
What other companies must we compare Exxon to?
BP (NYSE: BP) is still executing its asset disposal plan ($45 billion), but in the meantime should manage upstream annual production growth of 1% over the next five years with a focus on higher margin barrels, rather than purely volume growth. BP has been performing well, with reserve replacement last year above 100%. The energy company expects to increase production 1% through 2014. BP pays one of the top dividend yields in the industry at 5.2%, and its payout ratio is on the low side at 35%.
Total (NYSE: TOT) has built one of the most irregular portfolios in this space by targeting unconventional and high risk-high reward assets. Mixture-wise, Total has an impressive portfolio allocation with a 60% oil - 40% gas breakdown. Total hopes to grow production at 2% through 2016 and its dividend is one of the best out there with a 5.8% yield.
Marathon Oil (NYSE: MRO) posted 3Q EPS of $0.64, compared to $0.59 in 3Q 2011, on the back of better than expected onshore production. Third quarter volumes were up 10% on a quarter over quarter basis and are expected to see to see solid growth going forward from onshore U.S. operations. Close to 55% of CapEx is expected to be allocated to onshore territories - 35% at Eagle Ford alone. The oil and gas company expects to keep CapEx relatively flat in 2013, but also has a dividend that yields just 2.2%. Marathon saw Steven Cohen of SAC Capital up his stake almost 200% last quarter (check out Steven Cohen's big bets).
In short, Exxon is one of the top defensive names in the sector with solid dividend growth. We believe that Exxon's cash flow generating abilities are robust and will allow the company to throw off excess cash in the near future.
This article is written by Marshall Hargrave and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article.
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