Source: PaxForex Premium Analytics Portal, Fundamental Insight
ExxonMobil | Fundamental Analysis
ExxonMobil raked in $16.3 billion in cash in Q1, bringing their total cash balance to $32.7 billion, despite significant expenditures on capital projects and shareholder payouts. The company's substantial cash reserves have sparked speculation about potential big acquisitions, but management has indicated a patient approach during their first-quarter earnings call, dampening the rumors. Here is an overview of the speculation and management's statements regarding potential deals.
ExxonMobil's enormous cash reserves have fueled speculation about a potential major acquisition. One such rumored deal was with Denbury Resources, valued at over $5 billion, due to its carbon dioxide business, which could have strengthened ExxonMobil's carbon capture and sequestration platform. Another recent rumor involved preliminary talks with Pioneer Natural Resources, valued at nearly $50 billion, for its leading position in the Permian Basin. While ExxonMobil is open to making a deal, the company has stated its intent to be patient, according to management's comments during the first-quarter earnings call.
ExxonMobil has reportedly had discussions about merging with at least one other company, in addition to Pioneer Natural Resources. The identity of the other potential target is unknown, but it's speculated to be a major producer in the Permian Basin.
During Exxon's first-quarter earnings call, an analyst asked the management team about their views on mergers and acquisitions, specifically in regards to strengthening the company's position in the Permian Basin. CEO Darren Woods responded that the company is constantly on the lookout for potential acquisitions that would create value and be accretive to earnings. He emphasized that any acquisition must be one where the combined company is greater than the sum of its parts, and where ExxonMobil's involvement would enhance the potential of the other company. This, he said, is the company's underlying approach to M&A.
ExxonMobil's CEO, Darren Woods, emphasized that the company's primary focus is not on increasing the volume of oil and gas it produces, but on finding value. He stated that any acquisition must be value-accretive and bring a unique value contribution to the shareholders. Exxon's proprietary technology plays a significant role in its value proposition in the Permian Basin, as it helps improve resource recovery and lower development costs. This technological expertise makes the company attractive to potential acquisition targets as it can extract more value from resources by leveraging its technology.
Woods emphasized that the company is interested in acquisitions that are value-accretive, where the combination of ExxonMobil's capabilities with those of the target company increases value for shareholders. He also noted that while the company is focused on opening up the value proposition of its current acreage in the Permian Basin through technology, it is not in a rush to do a deal. ExxonMobil wants to continue demonstrating its unique technological expertise and value proposition before considering a future acquisition that can fully leverage its position.
ExxonMobil's cash reserves have been increasing significantly, but the company is not in a hurry to spend it. Though there have been rumors of acquisitions, management has made it clear that their priority is on creating value through technology and they're open to deals only if they bring unique value to their shareholders. The company is interested in the Permian Basin but is more concerned with improving its technological capabilities to open up opportunities for acquisitions in the future.
As long as the price is above 103.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 105.69
- Take Profit 1: 111.00
- Take Profit 2: 115.00
Alternative scenario:
If the level of 103.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 103.00
- Take Profit 1: 100.00
- Take Profit 2: 97.00
