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    Exxon Earnings Could Take Stock To $92

    By Trefis Team | Forbes – Wed, Jul 27, 2011

    Exxon Mobil will release its Q2 results tomorrow in an already busy earnings week that includes earnings releases from competitors like BP, ConocoPhillips and Anadarko Petroleum.

    Exxon is the largest vertically integrated oil major and has operations in upstream exploration and production, refining, marketing, trading of natural gas and the manufacturing of petrochemicals.' High oil prices are expected to help Exxon maintain the double digit growth in upstream revenues it has posted over the last few quarters. The downstream and chemicals businesses of the company are also expected to show growth driven by the improving macroeconomic conditions.

    We have a $92 price estimate for Exxon Mobil, which is a 10% premium over its current market price.

    Upstream production revenues expected to jump

    High oil prices helped BP increase its profits by 13% this quarter despite a 11% drop in production volumes. [1] While BP’s volumes may have declined because of the divestment plan it was forced take in order to pay for the Gulf of Mexico spill, production volumes at Exxon are expected to stay at the historic levels of over 4 million barrels of energy equivalent a day and thereby help the company report higher revenue growth.

    [trefischart ticker=XOM width=350 driver=0748]

    Exxon also has had significant success in its exploration and production efforts this quarter with a major find in the Gulf of Mexico. Exxon has maintained a reserve replacement ratio of around 95% for liquids and 158% for its gas reserves which should allow it to maintain its production levels over the future. (See: Exxon Makes Major Deepwater Find in the Gulf of Mexico)

    Downstream and chemicals revenues

    Exxon’s downstream and marketing revenues are also expected to see an upswing with crack spreads at an all-time high. We expect the marketing margins to increase after seeing a decline in Q1 2011. [2] Revenues and margins are also expected to improve because of the refining optimization efforts the company is engaged in.

    Special Offer: Safety In High-Yield. Three of Richard Lehmann’s fixed-income portfolios yield more than 7.1%.  Click here for to gain access to his portfolios in Forbes/Lehmann Income Securities Investor.

    The chemicals business should show strong growth with the opening of the Shanghai Technology Center that is targeted at the Chinese petrochemical market. China accounts for a third of the growth in the petrochemical market and is now the biggest player in the space.

    Click here for our full analysis of Exxon Mobil.

    Notes:

    1. BP Profits Disappoint Despite Oil Price Jump, CNBC [↩]

    2. Exxon Mobil Management Discusses Q1 2011 Results – Earnings Call Transcript, Exxon Mobil Earnings Call Transcript – Seeking Alpha [↩]

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