Update ExxonMobil (XOM)

I think this quarter marks an important transition for oil stocks. What everybody knows—the consensus wisdom that is baked into stock prices–has moved on. Everybody now accepts that oil prices will be low enough so that oil company earnings will look terrible in comparison to 2008. Declines in revenue and earnings next quarter aren’t going to move oil company stock prices much in October as long as they’re a result of today’s relatively low oil prices in the range of $60 to $70.

Instead the story going forward is going to be falling production. The evolving consensus seems to be that the major oil companies are going to have a tough time increasing production in the coming quarters. If that emerging consensus turns out to be right, it will push oil stocks down some more. If it’s wrong. Well, the share prices of oil companies that surprise will be off to the races. (Well, relatively. This is still a sector depressed by the drop in global demand.)

For more on why the falling production story is true in the long run see my book, The Jubak Picks. But I’m not talking long-term here. Just the next quarter or two.)

In that shorte time frame,  I think the emerging consensus stands a good chance being wrong when it comes to ExxonMobil (XOM). And that’s why I’m going to stick around in the stock, keeping it in Jubak’s Picks, albeit with a slightly lower target price. Read more

With Exxon and Chevron on deck, it’s so far, not so good in the oil sector

And seldom was heard an encouraging word…. At least from the oil producers and oil service companies that have reported second quarter earnings as of the close of trading on July 29.

The best news is that oil companies aren’t slashing capital spending budgets anymore. But no one is increasing them much either on the early evidence from BP (BP) and oil service companies such as Oceaneering International (OII).

We’ll know later today and tomorrow, respectively, if ExxonMobil (XOM) and Chevron (CVX), tell the same story when they report.

Typical of the sector so far is this from BP (BP) CEO Tony Hayward: “We see little evidence of any growth in demand and expect the recovery to be long and drawn out.” Read more

Next week it’s oil, oil and more oil earnings. To know where the industry is going, forget profits and look at capital spending

Exxon Mobile (XOM). Chevron (CVX). Royal Dutch Shell (RDS.A). BP (BP). ConocoPhillips (COP). Noble Energy (NBL) Apache (APA). Petro-Canada (PCZ). All these production companies report quarterly earnings next week.

Add in drilling equipment and oil service companies such as Smith International (SII), Oil States International (OIS) and National Oilwell Varco (NOV) and you’ve got quite a week for oil.

Move over technology, it’s time oil stocks get their fifteen minutes of fame. But what’s most important next week isn’t the topline earnings per share numbers that will grab the headlines. If you really want to see where the oil market and oil stocks are headed, concentrate on what these companies say about their capital spending plans for the rest of the year. That will tell you whether oil company CEOs think we’re seeing a real, sustainable economic recovery that will keep oil prices climbing or a temporary gusher that will dry up in a few months. Read more