|Shares Out. (in M):||5,050||P/E||0.0x||0.0x|
|Market Cap (in $M):||364,173||P/FCF||0.0x||0.0x|
|Net Debt (in $M):||12,000||EBIT||0||0|
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Exxon Mobil offers a very attractive risk/reward given its highly scarce and irreplaceable asset base comprised of among the lowest cost energy assets in the world, a world class chemicals business, and one of the most complex refining operations in the world. At just over 10x 2011 my $7 estimate and at a steep discount to net asset value, XOM shares offer a very good entry point. These are the cheapest and arguably the highest quality oil barrels in the world. At the end of the day, this is one of the world's best franchises, earning returns on equity north of 25% through the cycle with a long track record of excellent returns on capital, and of capital. Not least the stock is trading at its lowest price to book multiple in some 15 years implying returns will go down by a signficant amount despite some high return projects that the company has on now (Qatar) and coming on (Kearl Oil Sands). While many are pointing to the dilutive nature of the XTO deal, I believe the market will look back at this acquistion as it does at XOM's last acquistion which was Mobil in over 10 years ago: i.e. a smart acquistion at close to the bottom of a tough cycle.
Capital Structure/Capital Allocation
Valuation: Another way to frame valuation is that they earned over $1 in Q408 and Q109 which were clealry among the toughest quarters in a long time. Annualizing that number to $4 and adding XTO earnings get you to 15-16x trough earnings for a world class business.
Some comments on XTO acquisition:
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