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S&P Capital IQ's Glickman: buy Exxon Mobil, not Chevron

Friday, July 31, 2015 - 04:03

Stewart Glickman, who covers oil companies at S&P Capital IQ talks about why he raised his rating on Exxon Mobil from Hold to Buy. Bobbi Rebell reports.

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ExxonMobil and Chevron out with earnings misses here with more is directly and he covers the company over and he capital IQ caddies there. Hi good afternoon ar till mother passed you with lower oil prices tell us more about that and why it's having such a bad impact of these companies. Lower oil prices is is a huge country heir to the earnings decline that. Both Exxon and Chevron saw in the second quarter. You know what it what it does basically is it hurts the profitability and the on the act economic rationale for a lot of projects and so when when companies are thinking about those final investment decisions about whether or not to go ahead with a particular project. It really influences. You know that the thinking about whether or not a project is gonna meet a particular. You know pearl rate. Comments I think what ends up doing is it makes everyone kind of scramble to cut costs. And if folks it it it really encourages folks to take a really hard line and look at whether any individual project makes a lot of sense. And in fact we did hear from both companies today about various things that they are doing. To pare back. Yes exactly I think you know in some cases it's you know a little bit more in terms of standardization about trying to. You know. Have your operations be streamlined as they can be and some cases it's also trying to get more service cost deflation. So you know these companies. Use oil services companies in to help to help. Help them generate all that crude oil natural gas production get out of the ground. And they've been accustomed to paying higher prices in the past and because there's a lot of folks on the services side they're looking for fewer and fewer jobs. The prices that they can charge a start to come down pretty considerably and we're seeing. Percentage cuts anywhere from 10% up to save 40% or maybe even a little bit higher depending on what kind of service line. So I'm sorry you know let's cover each of the two companies ExxonMobil they're profits were down more than 50%. What are the key issues there. So you know the big the biggest factor of course is is weak oil prices. But I don't think the the quarter was quite as bad for Exxon. As as some people were focusing on. I think there was a fact that they missed. Was was is is automatic negative I think at first glance but if you look behind the numbers a little bit their tax rate was a bit elevated compared to what they typically palace. They have a fairly heavy refining maintenance schedule in the second quarter that probably took a little bit of that downstream profits away from what they could've been. All in all identical is that terrible a quarter. They have a history of doing you know very very efficient operations anyway. And and we upgraded our opinion on the shares to a four stars or by opinion from when previously been three stars hold. And what about Chevron air profit down 90%. And that's just terrible. Chevron Chevron had I'm more severe earnings cut to ensure that an Exxon did partly because they took some impairment charges and some of their their upstream assets. So these are these are assets where they say okay in in in a new. Lower oil price environment and it's sort of tacit recognition that oil prices probably are not gonna recover significantly anytime soon. I'm in that kind of environment I take impairment charges early Chevron did and and they missed pretty badly compared to what the consensus numbers war. We actually downgraded our opinion on Chevron today to a three stars from a former four stars. I think jet Chevron's got a lot of balls in the air than trying to juggle. They're looking at 2017. As being key milestone for them and I think I think they can maintain their dividend. But I think that they may fall short on production in their efforts to protect the dividend right thank you summit sewer. Thank you I think US handicap like historically been about your about this is Reuters.

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S&P Capital IQ's Glickman: buy Exxon Mobil, not Chevron

Friday, July 31, 2015 - 04:03