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Presented 11/10/09

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  1. 1. Brought to you by the TFG Energy Analysts
  2. 2. Outline <ul><li>Industry overview </li></ul><ul><ul><li>Oil & Natural Gas </li></ul></ul><ul><li>Intro to company </li></ul><ul><li>Ongoing & future projects </li></ul><ul><li>Catalysts for growth </li></ul><ul><li>Competition </li></ul><ul><li>Financials </li></ul><ul><li>Risk </li></ul><ul><li>Management </li></ul><ul><li>5 reasons to invest </li></ul><ul><li>Price Target </li></ul>
  3. 3. Oil and Natural Gas Industry Overview <ul><li>National Companies vs . “ Super - Majors ” </li></ul><ul><li>Oil is used mostly for transport fuel and petrochemical production - competes with biofuels and potentially , electric / hybrid cars </li></ul><ul><li>Natural Gas is used for electricity production and heating and competes with coal ( to some degree with nuclear and hydro ) </li></ul><ul><li>Oil accounts for 1/3 of world ’ s energy use and growing </li></ul><ul><li>Natural Gas accounts for ¼ word ’ s energy use and growing </li></ul>
  4. 4. Industry Sectors <ul><ul><li>Upstream </li></ul></ul><ul><ul><ul><li>Exploration, development, production, and marketing of energy sources (oil, natural gas, etc) </li></ul></ul></ul><ul><ul><li>Downstream </li></ul></ul><ul><ul><ul><li>Refining, marketing, distribution and transport of fuels ( producing, transporting and selling of gasoline, jet fuel, etc) </li></ul></ul></ul><ul><ul><li>Chemical </li></ul></ul><ul><ul><ul><li>Production of various petrochemicals (plastics, lubricants, electronic equipment parts, lots more) </li></ul></ul></ul><ul><ul><ul><li>Some companies are Integrated (ExxonMobil, Shell, Chevron) </li></ul></ul></ul><ul><ul><ul><li>Some companies are specialized (AnaDarko) , transport firms </li></ul></ul></ul>
  5. 5. Future Outlook <ul><li>Demand for Natural Gas and Oil will rise – especially in developing world (China, India, etc) </li></ul><ul><li>Oil and Gas prices will rise with recession’s end </li></ul><ul><li>Demand for petrochemicals will rise- also mostly in the developing world </li></ul><ul><li>Supply of oil is more closely related to the dollar than it is to demand </li></ul>
  6. 6. Projected world energy demand
  7. 7. Company Background <ul><li>ExxonMobil emerged in 1999 from a merger between Exxon and Mobil . Both companies descendant from Rockefeller’s Standard Oil. </li></ul><ul><li>Currently the largest publicly traded petroleum and petrochemical company worldwide . </li></ul><ul><li>Engaged in the exploration for and production of crude oil and natural gas (upstream) , the manufacture of petroleum products , and the transportation and sale of crude oil , natural gas , and petroleum products (downstream). </li></ul>
  8. 8. Company Background <ul><li>In addition , ExxonMobil markets and manufactures commodity petrochemicals (chemicals). </li></ul><ul><li>Partake in operations on every continent </li></ul><ul><li>Ideology of the company- 5 principles </li></ul><ul><ul><li>Portfolio quality </li></ul></ul><ul><ul><li>Global integration </li></ul></ul><ul><ul><li>Discipline and consistency </li></ul></ul><ul><ul><li>Value maximization </li></ul></ul><ul><ul><li>Long term perspective </li></ul></ul>
  9. 9. Downstream Business Lines <ul><li>Retail : 29,000 service stations worldwide ( e . g . your local gas station ) </li></ul><ul><li>Industrial & Wholesale : serves transportation fleets , power generation companies , the agriculture sector manufacturers , and mining operations ( e . g . your local utility company ) </li></ul><ul><li>Aviation : serves airports , commercial airlines , general aviation , and military aviation . </li></ul><ul><li>Marine : provides fuel to the shipping industry fleet ( container carriers , tankers , ferries , and cruise ships ) </li></ul>
  10. 10. Ongoing Projects -Upstream -Downstream -Chemical
  11. 11. Upstream- New Projects <ul><li>ExxonMobil well positioned to capitalize on emerging growth in oil, natural gas markets (N. America, Western Europe, Asia-Pacific) </li></ul><ul><li>Example Projects: 1) Qatar Gas- biggest private gas field 2) Papua New Guinea LNG 3) Pinecone Basin – Colorado </li></ul><ul><li>Comparative Advantages: superior return on capital, superior technology, jumpstart due to host country relations and capital </li></ul>10
  12. 12. Downstream and Chemical Projects <ul><li>Increasing efficiency and thus profit margins (through technology R&D) </li></ul><ul><li>Competitive Advantages in Downstream and Chemical: Brand Recognition and Trust, Strategic Global Alliances (Car companies, rubber companies, etc.), growth in emerging markets </li></ul><ul><li>New Refineries and Petrochemical Facilities in China, Singapore, Qatar </li></ul><ul><li>Recently announced joint venture with Toray Industries to produce separator films for lithium ion batteries </li></ul>
  13. 13. Revenue / profit breakdown This shows that although Downstream operations account for most of the revenues , the margins for upstream revenues are much higher .
  14. 14. Geographical revenue / profit breakdown and CAPEX Margins are slightly better for the non - US arm of their business In response to larger margins from upstream operations , a majority of CAPEX for 2008 was invested for upstream purposes
  15. 15. Diversification of investments
  16. 16. Catalysts for Growth <ul><li>Industry Growth </li></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Energy Production </li></ul></ul><ul><li>Asset Acquisition and Development </li></ul><ul><li>Technological Advancement </li></ul><ul><ul><li>Efficiency </li></ul></ul><ul><ul><li>Green Tech </li></ul></ul><ul><li>Legislative Action </li></ul>
  17. 17. Projected production by region
  18. 18. Outperforming their competitors
  19. 19. Competitors
  20. 20. Return on Equity P / FCF Financial Comparison
  21. 21. Net Income Comparison
  22. 22. Financials <ul><li>5 year revenue CAGR : 14.8% </li></ul><ul><li>5 year net profit CAGR : 16.02% </li></ul><ul><li>Price / FCF : 9.21* </li></ul><ul><li>Net profit margin : 10.64%* </li></ul><ul><li>Cash : $15.73 B * </li></ul><ul><li>Debt : $9.27 B * </li></ul><ul><li>5 year avg . ROE :33.69%* </li></ul><ul><li>ROA : 19.24%* </li></ul>* indicates industry leader
  23. 23. Revenue 2004- present Net Income 2004- present EPS 1989- present ROE 1989- present
  24. 24. Risks <ul><li>Industry & Economic Risks </li></ul><ul><ul><ul><li>Change in economic conditions or consumer demographics or preferences </li></ul></ul></ul><ul><ul><ul><li>Supply disruptions : weather , supply development </li></ul></ul></ul><ul><ul><ul><li>Member adherence to OPEC quotas </li></ul></ul></ul><ul><li>Legal & Political Risks </li></ul><ul><ul><ul><li>Changes in regulation or taxation </li></ul></ul></ul><ul><ul><ul><li>Political unrest </li></ul></ul></ul><ul><ul><ul><li>Restrictions on exploration </li></ul></ul></ul>
  25. 25. Management <ul><li>Rex Tillerson was CEO & Chairman of Exxon Corporation prior Exxon Mobil merger in 1999 </li></ul><ul><li>Business Philosophy : investing in long - term success rather than reacting in short - term market fluctuations </li></ul><ul><li>ExxonMobil does not base long - term investment strategy on short - term trends in commodity pricing </li></ul><ul><li>Continues heavily invest in innovation </li></ul><ul><ul><li>$126 B over the 5 next years </li></ul></ul>
  26. 26. Reasons to Invest <ul><li>Pristine balance sheet / well capitalized </li></ul><ul><li>Best project management team in the industry </li></ul><ul><li>Great upstream operations </li></ul><ul><li>Increasing demand for oil / natural gas worldwide out of recession </li></ul><ul><li>Only share buyback program in industry , as well as a consistently growing dividend </li></ul><ul><li>Future estimates are among the best in the industry </li></ul>
  27. 27. Price Target <ul><li>Current price : $72.54 </li></ul><ul><li>EPS 2010 ( est .): $5.97 </li></ul><ul><li>EPS 2011 ( est .): $6.68 </li></ul><ul><li>5 year historical P / E ratio : 13.7 </li></ul><ul><li>( Historical P / E multiple ) X (2010 EPS estimate ) = 2010 Price Target </li></ul><ul><li>13.7 x 5.97 = $81.79 (12.75% return ) </li></ul><ul><li>2011 Target </li></ul><ul><li>13.7 x 6.68 = $91.51 ( ~ 13% annual return ) </li></ul>source: Bloomberg