Valuentum Exclusive Analysis for the Discerning Investor

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Apr 16, 2021

Dividend Increases/Decreases for the Week April 16
Let's take a look at companies that raised/lowered their dividend this week.

Aug 14, 2020

Our Thoughts on Chevron Buying Noble Energy
Image Shown: An overview of Chevron Corporation’s all-stock acquisition of Noble Energy Inc that was announced in July 2020. Image Source: Chevron Corporation – July 2020 Noble Energy Acquisition Presentation. On July 20, Chevron Corp announced it was acquiring Noble Energy through a $5.0 billion all-stock transaction, or $13.0 billion when factoring in net debt and the book value of non-controlling interests. Shareholders of Noble Energy will receive approximately 0.12 share of Chevron for each share of Noble Energy. At the time the deal was announced, shareholders of NBL were receiving a ~12% premium based on the ten-day average closing stock prices. Chevron intends to issue ~58 million shares to cover the deal, keeping in mind the firm had approximately 1.85 billion shares outstanding on a weighted-average diluted basis as of the second quarter of 2020. The deal is expected to close during the fourth quarter of this year and is forecasted to generate $0.3 billion in annualized run-rate cost synergies one year after closing.

Jun 16, 2020

Exxon Mobil Puts on a Brave Face
Image Source: Exxon Mobil Corporation – November 2019 Guyana IR Presentation. Near-term oil prices and most importantly, the oil price futures curve, have improved materially since just a couple of months ago when it looked like the sky was falling. For the first time ever, WTI turned negative in April 2020 for physical deliveries due May 2020 of light sweet oil to Cushing, Oklahoma, as storage options were limited (and arguably, many speculators had jumped into the market not fully aware of the risks they were taking on). Exxon Mobil Corp has seen its share price recover considerably since the drop, though we caution that management’s commitment to the dividend will prove a hard task if things do not improve materially in the short-term. As of this writing, near-term futures for WTI and its international counterpart Brent are trading near $40 per barrel. In the face of COVID-19, low raw energy resource prices (Exxon Mobil’s upstream operations form its largest single business segment), and subdued demand for refined petroleum and petrochemical products (from gasoline to plastics) have significantly weakened Exxon Mobil’s cash flow profile. The ongoing coronavirus (‘COVID-19’) pandemic has shaken energy markets to their core in ways we have not seen ever before. Shares of XOM yield ~7.4% as of this writing. We give Exxon Mobil a Dividend Cushion ratio at 0.2, though its Dividend Safety rating is “GOOD” given the company’s ability to tap capital markets, especially debt markets as the oil giant carries high quality “A-rated” investment grade credit ratings. There is a limit to how much debt Exxon Mobil can take on to cover its dividend obligations, however, which we will cover in greater detail in this article.

Apr 13, 2020

Historic Oil Deal Reached
Image Source: Chevron Corporation - March 2020 Security Analyst Meeting Presentation. Over the Easter holiday weekend, members from the Organization of Petroleum Exporting Countries (‘OPEC’), non-OPEC members that are part of the OPEC+ group (countries that in the recent past have joined forces with OPEC to curtail global oil supplies in a formal manner), and non-OPEC members outside of the OPEC+ group such as Brazil, Canada, and the United States came to an agreement to cut their collective oil output by north of 10 million barrels per day. Global oil and other raw energy resource prices have been simply demolished year-to-date due to a combination of demand destruction from the ongoing coronavirus (‘COVID-19’) pandemic and the emergence of a price war between Saudi Arabia and Russia. Please note that oil demand destruction due to the “cocooning” of households (and the related drop off in refined petroleum product demand from automobiles, airplanes, etc.) may be as high as 35 million barrels per day according to some analysts, an enormous figure that’s resulting in major stockpile buildups all over the world. Other analysts don’t necessarily see the level of demand destruction as that high (projections are being updated constantly); however, they are still calling for a drop off in demand that’s in the ten(s) of millions of oil barrels per day range (at least in the short-term, depending on how long the pandemic lasts). Even if this agreement is effectively implemented, that won’t result in oil prices (and other raw energy resource prices) returning to pre-COVID-19 levels in the short/medium-term, in our view, but will make emerging from this pandemic an easier task given that global oil storage capacity is nearing its limit. As of this writing on April 13, oil prices are trading up modestly but are still down by well over 50% year-to-date.

Feb 21, 2020

Dividend Increases/Decreases for the Week Ending February 21
Let's take a look at companies that raised/lowered their dividend this week.

Dec 12, 2019

Analyzing Chevron and Important Updates in the Global Energy Industry
Image Source: Chevron Corporation – November 2019 IR Presentation. In this note, let’s cover the current state of raw energy resource prices in North America and around the world. We’ll analyze Chevron’s 2020 capital investment and exploration budget, in particular, and the global energy industry at-large. Shares of CVX appear generously valued, as of this writing, given the numerous headwinds facing the energy industry going forward.

Jun 30, 2019

Chevron's Permian Opportunity, Outsize Dividend Yield
Image Source: Chevron Corporation -- IR Presentation. Large oil & gas companies like Chevron are often sought after for their nice yields and promising growth prospects; however, the space has been undergoing a medium/long-term bust since late-2014. Chevron earned a return on invested capital, excluding goodwill, that was lower than its estimated weighted-average cost of capital in 2018 (its ROIC ex-goodwill were negative in 2016 and 2017). We don’t expect that to change until fiscal 2020 at the earliest, under our baseline assumptions, but we do expect Chevron’s financial performance (and returns) to improve materially through the early-2020s. That isn’t enough to get use excited about Chevron’s shares and its nice yield, but we are monitoring the space at-large.

May 3, 2019

Energy Earnings Roundup
Image Source: Exxon Mobil Corporation -- First quarter 2019 earnings presentation. 

May 18, 2017

Brazil: Sorry For Your Losses
The Brazilian equity markets are in free fall.

Jan 26, 2016

Not Doom and Gloom – But Just Cautious…
Let’s go around the world in this note…