Valuentum Exclusive Analysis for the Discerning Investor

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Mar 2, 2022

Evaluating the Exposure of Chevron and Exxon Mobil to Russia’s Energy Industry
Image Shown: Shares of Chevron Corporation (blue line) and Exxon Mobil Corporation (orange line) have skyrocketed over the past six months. Chevron Corp and Exxon Mobil Corp, our two favorite large cap energy firms included as ideas in the newsletter portfolios, have relatively modest exposure to Russia. Peers such as BP plc and Shell plc have publicly stated that they would effectively abandon their stakes in Russian operations, and there is a decent chance Chevron and Exxon Mobil will follow suit. Let's talk about the potential impact.

Jan 11, 2022

Valuentum’s Theses on Best Ideas Chevron and Exxon Mobil Playing Out
Image Shown: Shares of Chevron Corporation (the green/red bars) and Exxon Mobil Corporation (the blue/yellow bars) have been on a nice upward climb over the past six months with room to run higher as investors are rotating into energy firms in a big way. Raw energy resources pricing has surged higher during the past year with room to run. The global energy complex is on the rebound as demand for crude oil and refined petroleum products is steadily recovering from the worst of the coronavirus (‘COVID-19’) pandemic. As demand for electricity and heating needs held up well during the pandemic, liquified natural gas prices (‘LNG’) put up a strong year in 2021 and remain elevated. The OPEC+ cartel is committed to slowly phasing out its crude oil supply curtailment agreement first enacted in 2020, effectively limiting growth in global oil supplies at a time when demand is rebounding at a brisk pace. We view the near-term outlook for the global energy complex quite favorably and have been pounding the table on this issue for some time. Back on June 27, 2021, we added Chevron Corp and Exxon Mobil Corp as ideas to both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios and highlighted these portfolio changes. Shares of CVX and XOM yield a juicy ~4.3% and ~5.1% as of this writing, respectively. Recently, shares of both CVX and XOM have started shifting higher, and in our view, this is just the beginning of a strong cyclical recovery. We also recently added Chevron and Exxon Mobil as ideas to the High Yield Dividend Newsletter portfolio, and highlighted two of our favorite midstream master limited partnerships (‘MLPs’) in that publication as well. Our fair value estimate for Chevron sits at $140 per share and the high end of our fair value estimate range sits at $175 per share, while CVX is trading at ~$127 as of this writing. Our fair value estimate for Exxon Mobil sits at $92 per share and the high end of our fair value estimate range sits at $122 per share, while XOM is trading at ~$71 per share as of this writing. As investors continue to rotate into energy firms, we expect that the stock prices of Chevron and Exxon Mobil will continue converging towards our estimate of their respective intrinsic values.

Jan 10, 2022

High Yielding Philips 66 Has a Solid Plan in Place to Reward Its Shareholders
Image Shown: An overview of Phillip 66’s expansive asset base. Image Source: Phillips 66 – November 2021 IR Presentation. Demand for diesel and gasoline has largely recovered from the worst of the coronavirus (‘COVID-19’) pandemic, though kerosene demand (jet fuel) has a way to go given depressed levels of international travel. The refining giant Phillips 66 took advantage of the rebound seen over the past year to pare down its debt levels on a consolidated basis. At the end of December 2020, Phillips 66 had $13.4 billion in net debt (inclusive of short-term debt) on a consolidated basis, which fell down to $12.0 billion in net debt (inclusive of short-term debt) at the end of September 2021. Going forward, Phillips 66 now wants to focus on returning cash to shareholders as communicated during a January 2022 investor conference. Shares of PSX yield a nice ~4.6% as of this writing.

Nov 4, 2021

Our Favorite Energy Giants Chevron and ExxonMobil are Focused on Returning Cash to Shareholders
Image Shown: Shares of Chevron Corporation (blue line) and ExxonMobil Corporation (orange line) are both up sharply year-to-date as of this writing. We liked what we saw in the latest earnings reports from Chevron and ExxonMobil. Both are focused on fiscal discipline and returning cash to shareholders in the form of dividend payments and share repurchases. Looking ahead, the outlook for the global energy complex is quite bright, and we continue to be huge fans of both Chevron and ExxonMobil. Please note we also include Energy Select Sector SPDR Fund ETF as an idea in the Best Ideas Newsletter portfolio to gain diversified exposure to the recovering global energy complex.

Oct 26, 2021

Schlumberger Recovering, Outlook Bright
Image Shown: Shares of Schlumberger NV are on the upswing, though the company’s stock price remains far below levels seen before the COVID-19 pandemic. On October 22, the oilfield services giant Schlumberger NV reported third-quarter 2021 earnings that missed consensus top-line estimates and matched consensus bottom-line estimates. The company’s business continues to recover as oil & gas investment activity is picking up steam around the globe after getting decimated last year in the face of the coronavirus (‘COVID-19’) pandemic. Looking ahead, Schlumberger expects significant improvement in its mid-cycle financial performance from current levels, aided by major cost structure improvements embarked on last year.

Sep 21, 2021

Booming Natural Gas Prices Great News for Chevron and ExxonMobil
Image Shown: Chevron Corporation – August 2021 IR Presentation. Natural gas prices in the US measured by the Henry Hub benchmark based in Erath, Louisiana, have surged higher over the past several months. This is partially due to the slowdown in domestic oil & gas development activity that occurred back in 2020 in the wake of the coronavirus (‘COVID-19’) pandemic and low crude oil prices. Though crude oil prices, measured by the domestic WTI and international Brent benchmarks, have since recovered, that has not resulted in domestic drilling activity returning to levels seen in 2019, though development activity has recovered somewhat. Henry Hub futures are trading north of $5 per million British thermal units (‘MMBtu’) through February 2022 as of this writing, dropping just below $5 per MMBtu for March 2022 deliveries.

Sep 14, 2021

Chevron Investing in Biofuels and Hydrogen
Image Source: Chevron Corporation – August 2021 IR Presentation. We are huge fans of Chevron’s dividend growth potential in the wake of the recovery seen in raw energy resources pricing year-to-date. Shares of CVX yield ~5.6% as of this writing, and we expect Chevron will steadily grow its payout going forward, aided by its promising free cash flow growth trajectory.

Aug 6, 2021

ExxonMobil’s Great Earnings Report and Promising Growth Outlook
Image Shown: An overview of ExxonMobil Corporation’s strategy to generate shareholder value going forward. Image Source: ExxonMobil Corporation – Second Quarter of 2021 Earnings IR Presentation. ExxonMobil’s financial performance is on the upswing, and its operational performance has been firing on all cylinders of late. We continue to be big fans of both ExxonMobil’s capital appreciation upside and dividend growth potential. Our fair value estimate for ExxonMobil under our “base” case scenario sits at $83 per share, well above where shares of XOM are trading as of this writing. The company’s Dividend Cushion ratio sits near parity at 0.9, and we rate both ExxonMobil’s Dividend Growth and Dividend Safety ratings as “GOOD” given its impressive cash flow generating potential. Shares of XOM yield a nice ~6.0% as of this writing.

Aug 3, 2021

Chevron Posts a Great Earnings Update, Share Repurchases to Resume
Image Shown: An overview of Chevron Corporation’s performance in the second quarter of 2021. We include shares of Chevron as an idea in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios and continue to be huge fans of the name as the global energy complex continues to recover from the worst of the coronavirus (‘COVID-19 pandemic). Image Source: Chevron Corporation – Second Quarter of 2021 IR Earnings Presentation. The global energy complex continues to recover from the worst of the COVID-19 pandemic, and that speaks quite favorably to Chevron’s outlook. Management is committed to improving the company’s balance sheet strength going forward, which we really appreciate. Chevron’s free cash flow performance in the second quarter highlights the incredibly powerful positive effect the recovery is having on its financial performance. Share buybacks, in moderation, represent a good use of capital in our view (based on where shares of CVX are trading at as of this writing). With all of this in mind, we would like to stress that Chevron remains committed to its dividend (the firm moderately boosted its quarterly dividend during the second quarter of 2021 by ~4% sequentially). We continue to like Chevron as an idea in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.

Jul 13, 2021

Chevron’s Promising Cash Flow Growth Outlook
Image Source: Chevron Corporation – May 2021 IR Presentation. The outlook for the global energy complex is bright and getting brighter as public health authorities utilize widespread coronavirus (‘COVID-19’) vaccine distribution efforts to put an end to the pandemic. We added shares of Chevron Corporation to the Best Ideas Newsletter and Dividend Growth Newsletter portfolios on June 27 in order to gain exposure to the ongoing recovery in the global energy complex via a high-quality integrated oil major. Shares of CVX yield ~5.1% as of this writing.